The UK’s life insurance industry is facing a significant period of adjustment as the country prepares for potential changes to the concept of ‘end of life’. With approximately two and a half years until the anticipated implementation of new legislation, companies must begin to adapt their practices. Eleos, a digital life insurance provider, offers insights on the challenges and considerations ahead.
On November 29, 2024, the Terminally Ill Adults (End of Life) Bill passed its second reading in the House of Commons with a significant majority, 330 votes to 275. The bill has progressed through the committee stage and is scheduled for its third reading in the Commons in April. The bill must then pass through the House of Lords, after which it will receive Royal Assent and become law. A two-year implementation period will follow before the law comes into effect, likely by early 2028. The bill applies specifically to residents of England and Wales.
The proposed legislation would grant individuals, at least 18 years of age, the right to seek assistance in ending their lives under specific conditions:
- A terminal illness diagnosis with six months or less to live, confirmed by medical professionals.
- Full mental capacity.
- A demonstrable ‘clear, settled and informed wish to end their own life’.
- The absence of coercion or pressure in their decision.
The procedure outlined includes:
- Assessments by two independent physicians.
- Approval from the High Court.
- A reflection period of 14 days (reduced to 2 days if death is imminent).
- Self-administration of a prescribed lethal drug.
Obstacles for Insurance Providers
Several key issues must be addressed by insurance providers to avoid disputes, challenges, and regulatory conflicts. These challenges include:
- Suicide Clauses: Many UK life insurance policies exclude claims for death by suicide within the initial 12 to 24 months following policy initiation. After this period, policies typically provide payouts. Leading reinsurer SCOR recommends that assisted dying be subject to the same clause. This would mean policies might not pay out for an assisted death within the first 12-24 months of the policy’s term. However, there are precedents in other countries like Canada, where assisted dying is legal and not categorized as suicide by insurers, presenting the UK industry with varying options.
- Terminal Illness Benefits: Life insurance policies often define ‘terminal illness’ as having 12 months or less to live. The 6-month timeframe in the bill creates a potential conflict, necessitating that insurers may need to revise their definitions.
- Claims Processing: It’s likely that insurers will need to conduct more extensive investigations into circumstances surrounding an assisted death to verify that all criteria have been met, which can delay payouts.
- Underwriting and Premiums: Insurers may adjust their risk assessment models leading to potentially more restrictive underwriting processes and altered premium calculations.
- Terms and Exclusions: Given the magnitude of the legislation’s impact, providers will almost certainly want to reassess terms such as exclusions and waiting periods.
- Forfeiture: The forfeiture rule, which prevents inheritance from an estate if an individual played a part in the death, may require more legislation independent from the insurance industry’s actions.
- Trusts: When life insurance policies are held in trust, the trustees have a legal duty to investigate the circumstances of a death of the insured. These inquiries can be complex and take considerable time, potentially delaying payouts.
Preparing for the Future
With a deadline of less than three years, insurers need to begin addressing these issues now, as well as any other issues that could emerge before the law goes into full effect. Collaboration within the industry is key to ensure that assisted dying treatment is handled in a manner that is distinct from suicide because a division could create uncertainty and inequities, complicating matters for consumers and damaging cooperation. Potential policyholders and those already covered by life insurance may need professional advice on implications related to the new legislation and industry-wide changes.
Between now and 2028, insurance companies should collaborate with their trade bodies to develop clear guidelines, practice standards and new policy terms.
Eleos CEO Kiruba Shankar Eswaran commented:
History has shown us that even the best drafted legislation can have serious unintended consequences, so the more preparation the industry can do, the better equipped it will be to respect the choices of individuals while maintaining the integrity of life insurance policies and guarding against abuse. It’s a responsibility we at Eleos don’t take lightly.”
