The Life Offices Association (LOA) has made a recommendation that HIV/Aids exclusions should be dropped on all existing life and disability policies because Aids should be treated like any chronic disease and not singled out for special pre-conditions. This is an important psychological step for the country in terms of how it views the disease.
Policies with an HIV/Aids exclusion meant that if the policy holder died of Aids or Aids-related illness they would not be paid out or were paid out a limit amount. This predominately affected policies that did not require underwriting in the form of health checks (blood tests) such as group life, funeral cover and credit life.
According to Bernard Ross, executive director of RGA Re-insurance, these policies were created around 1985 when the understanding of the full extent of Aids and what caused it was still unknown and the industry could not measure the full risk impact.
Fatima Hassan, a senior attorney with the Aids Law Project, said the uncertainty around the disease resulted in the life industry imposing an outdated model on people living with HIV/Aids and was specifically detrimental to those people who contracted the virus after taking out the life cover.
The bulk of the policies that will be affected by this decision were sold between 1985 and 2004. In January 2005, LOA members scrapped the exclusions from new policies and in June 2006 HIV/Aids specific waiting periods for new business were also scrapped.
Ross says that while legally an insurer can still revert to the initial policy agreement, the majority of life companies that are members of the LOA will no longer apply the exclusion from April 1. “For all policies, life insurers are effectively treating Aids like any disease rather than being isolated for different treatment,” says Ross.
While this will undoubtedly have an impact on the profits of life companies, it will be limited. As the policies are at least three years old, it naturally protects the life insurers from people who took out the cover knowing they were going to die in a short period of time and therefore will not materially affect the risk profile of the companies’ books.
Ross says waiting periods will still apply, but will not be Aids specific as has been the case with some policies. As part of anti-selective measures, life companies that offer risk cover without a full medical history tend to include a waiting period of several months to protect against cover being bought knowing the person would die in a short period of time.
Over the past year, new companies such as AllLife have launched new generation HIV products that take into account new information and developments in the fight against Aids and provide relatively cheaper cover for HIV-positive people who adhere to a strict treatment protocol.
However, lack of disclosure will result in non-payment. Just as a policyholder who lies about smoking may not be paid out if they die of lung cancer, so someone who knows they are HIV-positive at the time of taking out cover must disclose it.