Using Private Medical Clinics May Cost you More for Life Insurance.
If you use a private medical clinic – like Medcan, Medisys or The Cleveland Clinic – it may cost you more for life insurance. In some cases, it may cause a postponed decision or an outright decline by an insurance carrier. This may not seem significant to some, but for business owners, this can have a huge impact on how you go about setting up shareholder agreements, buy-sell arrangements, key-person arrangements, permanent life policies, split-dollar critical illness or other wealth, succession planning and tax-planning strategies that involve the use of life insurance or other related products.
Much debate has surrounded the two-tier healthcare system and how your financial wherewithal shouldn’t impact how quickly you should be treated in our medical system. This is not a debate about the pros and cons of private versus public healthcare. Instead, this is a personal observation about trends and relationships between the use of private clinics and its relationship with the cost of life insurance derived from several cases within my personal practice.
This is not the fault of the private medical clinic. Private clinics and a host of private clinics located throughout Canada provide for-fee private healthcare evaluations to individuals, families and businesses. These consultations are thorough; you see many different medical practitioner experts discussing fitness, nutrition and overall health. They do a deep-dive into your state of health and fitness, run a battery of tests, discuss family history and many other items on their medical checklists. These appointments usually last 4-5 hours, are succinct, professional, and follow up with a series of reports and test results. It resembles more like a day at the spa than a trip to the doctor’s office, except they identify any potential risks to the client and mitigate against these risks. All uncertainties are explored thoroughly and comprehensively. No rock goes unturned because the most benign issue gets addressed.
This, however, is where the problem lies.
Private clinics try to put their clients’ fears at ease, and they pay a significant amount of money for this peace of mind. Insurance companies tend to exploit any potential issues into risks and vulnerabilities. Instead of someone being rewarded for doing a comprehensive evaluation of their health, the insurance companies see this as an opportunity to promote doubt, cautiousness and vulnerability. The opposite should be the case, but ironically, it’s not the situation at hand. Insurance companies look at people who are proactively looking after their health and uncover potential issues as a larger risk to their underwritten policies. If a potential trace of illness or risk is identified at a private medical clinic, it’s documented, examined, and a regiment of tests are conducted. Would any of these low probability ailments be identified with a routine doctor’s visit or insurance paramedical examination? Perhaps, but likely not. The problem with these private clinics for business owners is their thoroughness. The thoroughness casts doubt on insurers.
The thoroughness that these private clinics afford is exactly the reason their clientele return year after year. These clients want to “Be proactive, identify any potential long term risks and get ahead of the problem.” But, unfortunately, insurance companies appear to take a completely different posture. They imply with their actions the following: thanks for being proactive in dealing with your health, but now we’re going to penalize you for it!
Many of the clientele at these private clinics either come from money, are business executives or business owners. These individuals are likely to have estate planning issues, business insurance requirements or likely have family insurance requirements. If these individuals are given a rating, postponement or decline on their insurance can significantly affect their ability to afford or qualify for insurance in the future.* These can impact the amount of taxes they pay, impact transitioning a business from one owner to the next or provide ample capital to a business for its continuation.
Recently, a small number of insurance companies are looking favourably at proactive wellness measures. They identified that fitness, counselling and regular check-ups could contribute to better overall health and, as a result, offer lower overall life insurance rates. Unfortunately, this is currently only offered in the family market with term life insurance. The insurance company that first embraces comprehensive physical evaluations, like those conducted in private medical clinics as a positive step in one’s health, will be rewarded for its pragmatism within the business insurance marketplace.
Until such a time occurs, we should remain sceptical every time a client who has recently undergone any tests at a private medical clinic will be treated favourably in the eyes of insurance underwriters. There’s no question the private clinics bring tremendous value and peace of mind to business owners and executives. Still, it may be prudent to address any potential life insurance needs before making an appointment at a private clinic.
*A postponement is an insurance underwriting term that refers to not underwriting a policy until more definitive information is received or concluded.
A rating is an insurance underwriting term that refers to a policy being approved but has an additional cost over and above the normal rate due to some risk deemed by the insurance underwriters.
A decline is the underwriter’s refusal to grant a policy to an individual because of a risk that the insurance company is not willing to assume.