A comprehensive guide to the underwriting process, what to expect, and how to achieve the best outcomes for your life insurance application.
Insurance underwriting is a critical step in obtaining life insurance, yet many Australians are unfamiliar with the process. This guide demystifies underwriting, explaining what happens behind the scenes when you apply for insurance, what factors are considered, and how you can navigate the process more effectively.
What is Insurance Underwriting?
Underwriting is the process an insurer uses to:
- Assess the risks involved in providing insurance to an applicant
- Decide whether to offer cover and on what terms
- Calculate an appropriate premium that reflects the level of risk
Why is Underwriting Necessary?
Underwriting serves important purposes for both insurers and the broader pool of policyholders:
Risk-Based Pricing
Premiums reflect each person’s level of risk, creating a fairer system where lower-risk individuals pay less than higher-risk individuals.
Sustainability of the Insurance Pool
By carefully assessing risks, insurers maintain financial stability and ensure they can pay claims for all policyholders. Without underwriting, insurers could attract only high-risk individuals, leading to unsustainable premium increases for everyone.
Personalised Coverage
The process allows insurers to tailor cover to each person’s circumstances, offering more appropriate and affordable options.
The Underwriting Process Explained
Step 1: Application Submission
You complete an application form providing:
- Personal details (age, gender, occupation)
- Medical history and current health status
- Family medical history
- Lifestyle factors (smoking, alcohol consumption, exercise)
- Dangerous activities or hobbies
- Financial information (income, existing insurance)
Step 2: Initial Assessment
An underwriter reviews your application to:
- Identify risk factors requiring further investigation
- Decide whether more information is needed
- Determine if medical tests or reports are required
Step 3: Additional Information Gathering
Depending on your age, health, and the amount of cover requested, you may need to provide:
- Medical examination
- Blood tests (may include cholesterol, blood sugar, liver and kidney function, HIV)
- Urine analysis
- Blood pressure measurement
- Height and weight (BMI calculation)
- ECG (electrocardiogram)
- Reports from your GP or specialists
- Financial documentation (for high cover amounts)
Step 4: Risk Assessment
The underwriter evaluates:
- Medical information against guidelines
- Lifestyle factors and their impact on risk
- Occupation and hobby risks
- Travel or residency in higher-risk countries
- Financial justification for the amount of cover
Step 5: Underwriting Decision
Possible outcomes include:
- Standard acceptance – cover at normal premium rates
- Loaded acceptance – higher premiums due to elevated risk
- Modified acceptance – cover with exclusions or limitations
- Deferral – decision postponed until further information or stability of a condition
- Decline – no cover offered due to unacceptable risk
Key Factors Considered in Underwriting
- Age – older applicants generally face higher premiums; many policies cease availability after age 65–75.
- Gender – women often pay lower premiums due to longer life expectancy.
- Health status – chronic conditions, recent surgery, or family history can lead to loadings or exclusions.
- Lifestyle factors – smoking can double or triple premiums; obesity, alcohol use and drug use also weigh heavily.
- Occupation – high-risk jobs (e.g. mining, fishing, construction) may attract exclusions or loadings.
- Dangerous activities – such as skydiving, scuba diving, or motor racing.
- Financial factors – high cover amounts must be consistent with income and financial need.
- Travel and residency – time spent in high-risk regions may impact terms.
Medical Underwriting
Common Medical Tests
- Blood profile (cholesterol, blood sugar, liver, kidney, HIV)
- Urine analysis
- Blood pressure check
- Height and weight (BMI)
- ECG for older applicants or higher cover amounts
Medical Reports
- Attending Physician’s Statement (APS): from your GP
- Specialist reports: where relevant
- Medicare history: with your consent
Common Medical Concerns
Insurers pay particular attention to:
- Cardiovascular conditions
- Diabetes
- Mental health history
- Cancer
- Respiratory disorders
- Obesity (high BMI)
- Back or joint problems
- Autoimmune disorders
Possible Underwriting Outcomes
Standard Acceptance
Approved with no restrictions or extra cost.
Premium Loading
Approved with increased premiums.
Example: A 45-year-old with well-controlled type 2 diabetes might pay 50% more than standard rates.
Exclusions
Approved with exclusions.
Example: An applicant with a history of back problems may have back-related claims excluded.
Deferral
Decision delayed until a condition stabilises.
Example: Someone recently diagnosed with depression may have to wait 6–12 months before reassessment.
Decline
Cover is not offered. Important: a decline from one insurer doesn’t mean another won’t accept you, as underwriting rules vary.
Tips for Navigating the Underwriting Process
- Be honest and thorough: You have a legal duty to take reasonable care not to make a misrepresentation when applying.
- Apply early: Cover is generally cheaper and easier to obtain when you’re younger and healthier.
- Prepare for medical exams: Avoid caffeine, nicotine, alcohol, salty foods, and strenuous exercise before tests.
- Have your medical information ready: Dates of diagnoses, medications, and treating doctors.
- Work with an adviser: Advisers know which insurers are more favourable for certain conditions.
- Consider a pre-assessment: Advisers can approach insurers informally to check likely terms before a full application.
Underwriting Differences Between Insurers
Each insurer has its own:
- Risk appetite – some are more flexible on certain conditions or occupations.
- Medical guidelines – approaches to conditions such as diabetes or mental health vary.
- Underwriting philosophy – conservative vs more open-minded.
- Special programs – some offer tailored programs for specific groups.
Being declined by one insurer doesn’t necessarily mean you’ll have the same result elsewhere.
Group Insurance vs Individual Underwriting
Group Insurance (through superannuation)
- Automatic cover up to default limits, with little or no health information required
- Accessible even with pre-existing conditions
- Often lower cost due to bulk pricing
- Exclusions for pre-existing conditions and limited features apply
- Cover amounts are usually modest
Individual Insurance (retail policies)
- Full medical and lifestyle underwriting
- Tailored cover and definitions
- More flexible features and higher cover amounts
- May involve loadings, exclusions, or declines depending on health
Many Australians hold a mix of both — default cover in super plus additional retail cover for more certainty and flexibility.
How a Financial Adviser Can Help
A qualified adviser can:
- Match your case to insurers with favourable approaches
- Help prepare and present applications thoroughly
- Arrange pre-assessments to avoid formal declines
- Negotiate with insurers for better outcomes
- Suggest alternatives if standard cover isn’t available
When choosing an adviser, look for someone who specialises in life and disability insurance, has strong insurer relationships, and is experienced with cases like yours.
