[Opinion] Can you recommend a replacement policy if that is likely to result in new special term exclusions?

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You might be excused for thinking that a client, with new health issues (arising since previous underwriting assessment) likely to be excluded, should never replace their policy, but is this really the case?

Tuesday, June 17th 2025, 11:07AM 1 Comment

by Steve Wright

Exclusions come in many forms, not all of them are special terms that apply specifically to a client.

Let’s consider a client who is unhappy with their current health insurer and who asks you to shop around for health insurance with more affordable premiums, but they have some ‘new’ health issues likely to result in special terms/exclusions.

Is the correct advice always to increase their excess with their current insurer?  Perhaps not! 

Let’s assume that this client has no specific special term exclusions and their existing cover is ‘clean skin’. However, they now have ‘new’ knee problems which will likely result in an exclusion for treatment to that knee if the client is underwritten by a new provider.

Is it fair to believe the existing cover has no exclusions and so should not be replaced? 

Let’s also assume your client’s existing health insurance doesn’t provide any benefits for treatments not funded by Pharmac, isn’t that in fact an exclusion that applies to your client?  

I think all benefits not covered by existing insurance, but covered by reasonable alternative policies, may effectively be exclusions for your client, even if they are not specified on the client’s policy schedule. 

In fact, there may well be many other such exclusions: benefits covered by other products but not covered by the existing product your client has.  

Some conditions or treatments may be included in your clients existing cover, but really in name only, when in reality they are really exclusions.  This could happen where, for instance, claim conditions are relatively onerous or benefit monetary limits are simply inadequate to give effective protection. 

This creates a ‘competing exclusions’ situation that must be resolved.

An exclusion for a known knee problem may well be the lesser of two evils when compared to a complete exclusion for treatments not funded by Pharmac. 

Your value as an adviser can clearly be demonstrated in a situation like this. 

Comparing numerous products and properly identifying and explaining the benefits, likely exclusions and their impacts, so that your client can make an informed decision, takes skill and very good product knowledge.

Dispute Resolution Schemes have highlighted the importance of product knowledge for advisers and have specifically stated that “…  a key insight for insurance advisers is to ensure you are familiar with the policies you are recommending, so you can identify exclusions that might be relevant to your client.” 

Steve Wright has qualifications in economics, law, tax, and financial planning. He has spent the last 20 years in sales, product, and professional development roles with insurers. He is now independent and helping advisers mitigate advice risk through training and advice coaching.

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