Life Insurance Articles
Non-disclosure of relevant information is the single largest reason for the rejection of a life or critical illness insurance claim. This true story points up the complications.
Life and Critical Illness Insurance - Tell the insurers everything when you apply.
Emma Mayo 14/10/06
The failure to disclose information, especially medical information, is the most common reason why an insurer will reject a claim on a life or critical illness policy. To help underline some issues, we want to tell you a true story - but we've concealed the policyholders' name and a few other aspects to preserve anonymity.
Mrs A was fighting a secondary infection following surgery to remove cancerous lymph nodes in her groin when she received further bad news. Her critical illness insurer was refusing to pay out the £200,000 she was expecting. To understand why and the issues involved it's useful to understand how the events unfolded.
In June 2001, Mrs A visited her GP after discovering a patch of flaky skin on her back. Mrs A thought it was eczema. During a brief consultation, her GP thought that it should be looked and recommended a referral to a dermatologist. But soon afterwards the flaky skin healed and Mrs A cancelled the appointment with the dermatologist. Apparently her GP did not express any major concern and some years later admitted that Mrs AP was in all likelihood unaware of the urgency of the referral.
Nine weeks later a sales representative from Company Z made a routine visit to Mrs A at her home. As Mrs A was now alone with a young family, the representative reviewed Mrs A's life insurance cover and suggested that she should also have a £200,000 Critical Illness policy. Mrs A thought that sounded a very good idea and willingly agreed there and then.
Two years later Mrs A was found to have skin cancer. Major surgery rapidly followed to remove the cancer. As her critical illness policy included cover for her cancer, Mrs A then made what she thought was a valid claim.
Company Z subsequently rejected her claim on the basis of reckless non-disclosure the insurers' jargon for Mrs A's failure to disclose her cancelled appointment with the dermatologist.
The events that followed showed that Mrs A's application should have included her referral to the dermatologist. So why didn't she disclose the information?
Secondly, the GP did not apparently convey to Mrs A the potential seriousness of her flaky skin and her referral to the dermatologist. If, when the insurance application was being completed, Mrs A was unaware that her condition was potentially serious and the representative said the referral question only related to serious conditions, Mrs A can hardly be held responsible for not disclosing that information.
In our view, and on the basis of the information provided to us, Mrs A is not to blame. Company Zs representative made the vital error. He gave incorrect guidance on what the question at the heart of the dispute, was asking for. In our view Company Z should pay out.
The lessons to be learnt
Always very carefully read each question on an insurance application form - and answer the question FULLY and ACCURATELY. Do not be tempted to be economical with the truth. If you do omit something they ask for, the insurance company can rightfully claim that you mislead them by omission. Never be tempted to omit some information in order to qualify for a cheaper premium. You might get a cheaper premium, but that's a false economy if a subsequent claim is rejected.
We hope Mrs A will get her payout as she was mislead by circumstances beyond her control. We believe she acted honestly. She deserves her payout and our best wishes.
Postscript : Reports show that Company Z refuse 5% of all Critical Illness claims due to non-disclosure. Some other insurers have much higher figures - Legal & General reject 16% and Friends Provident reject 15%. The insurance industry is trying to improve this situation by the ways they seek information from applicants and by the way the penalties for no-disclosure are explained.
Readers please note : You should undertake your own background checks before taking any action on any aspect mentioned in this article. Where the author has mentioned specific product details or given examples of how companies have reacted to specific situations, these should be correct as far as the author is aware when this article was written. In some cases additional background information not mentioned in the article has been used in obtaining the examples. Some examples or quotes may have been taken from information available in the public domain where all the background details may not be available. Insurers do change policy conditions and underwriting approach. They will view each situation on its own merits.
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