IPTM8075 - Exceptional risk of death or disability: ICTA88/SCH15/PARA12

Exceptional risk of death

The qualifying policy tests and the annual premium limit –see IPTM2070 - ignore any amounts, such as a premium loading, that relate to an exceptional risk of death, as set out in clauses in the policy. Such clauses must be particular to the policy and identified through specific underwriting on the individual assured. An example might be a policy for a particular deep-sea diver containing a specific premium loading clause.

The disregard in ICTA88/SCH15/PARA12 does not apply to a general, non-specific exclusion clause included in all policies, for instance a general AIDS exclusion clause. There would have to be clear evidence that an exceptional risk of death is known to exist. A loading because, for instance, the policyholder simply refused to undergo a medical, or gave an answer to a ‘lifestyle’ question that might indicate a higher risk, would not meet the condition. An exceptional risk of death does not extend to smokers.

Exceptional risk of disability

The qualifying policy rules and the annual premium limit - see IPTM2070 - also disregard, through ICTA88/SCH15/PARA12, amounts relating to exceptional risk of disability. As in the qualifying policy rules generally, risk of disability includes risk of critical illness. This may be relevant, for instance, where there is a premium loading for an exceptional risk of a critical illness that has been identified by the insurer as a result of detailed individual underwriting, such as a risk indicated by family history. As with risk of death, this rule only applies to exceptional risks, so for instance a loading for a common disease would not be within the scope of the rule.

Removal or addition of clauses relating to exceptional risks of death or disability

There may be circumstances where clauses relating to exceptional risks of death or disability are no longer required, for instance if a hazardous activity that led to a premium loading is no longer undertaken by the insured person. Similarly such a clause may need to be added to a policy that did not previously contain it.

Addition or removal of such clauses is not treated as a variation of the policy for the purposes of the qualifying policy rules and will not affect the qualifying status of the policy.

This may be relevant where an insurer removes a critical illness loading arising from a genetic test result, following the 2018 ABI and Government Code on Genetic Testing and Insurance. It would also apply where premiums are reduced because the exceptional risk of critical illness is reduced following medical advances.