First, some definitions. Full medical underwriting (FMU) is the traditional form of underwriting for a medical insurance policy. The applicant declares their medical history at the outset, which gives the insurer the option of excluding any pre-existing conditions. In practice, most pre-existing conditions are excluded and the exclusions are usually—but not always—permanent.

With moratorium underwriting, no medical history is declared on the application form. Instead, the applicant simply signs off on their understanding that any condition that has presented symptoms or required advice, treatment or medication in the past five years will be excluded upon enrolment. Excluded conditions can regain eligibility for benefit, but only once they have remained symptom-, treatment-, advice- and medication-free for a continuous two-year period after enrolment (but not necessarily the first two years of the policy).

This is known as a ‘rolling’ moratorium; there also exists the less-common ‘fixed’ or ‘flat’ moratorium where pre-existing conditions are automatically covered after two years, even if they have required treatment. PruHealth are the main proponent of the fixed moratorium, although Exeter Friendly have recently followed suit—see my earlier post. Because a fixed moratorium carries considerably more risk for the insurer, applicants deemed to be too high a risk—someone with a history of cancer, for example—are usually barred.

I’ll discuss the merits and drawbacks of each approach in my next post.