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Tell The Truth With Life And Critical Illness Insurance
By: Michael Challiner
Insurers treat the non-disclosure of information on an application form very
seriously indeed, and it is the most common cause for the rejection of a life or
critical illness insurance claim. This true story explains that the situation
isn’t always black and white, and demonstrates the severity of the penalty. We
have changed some details to protect the anonymity of the policyholder.
Ms W had to have an operation to eradicate cancerous lymph nodes from her groin,
and immediately fell ill after surgery with an infection she picked up in
hospital. Critically ill, she had already made a claim on her critical illness
insurance, however she received some unexpected bad news. Her claim was rejected
and she was not going to receive the £200,000 she was insured for. How did this
happen? Read on so we can explain.
June 2001 – Ms W went to see her doctor about an area of flaky skin on her back,
she assumed it was something like eczema. Her GP wanted a specialist to have a
look, and made a referral to a dermatologist. Before the appointment arrived,
the patch of flaky skin cleared up, so Ms W cancelled the appointment, thinking
no more about it. She did not imagine that it was anything serious, and the GP
had not given her the impression that there was anything to worry about.
August 2001 – a sales representative from Ms W’s life insurer, Standard Life,
called for a routine sales visit. Ms W’s circumstances had changed and she now
had a young family depending on her. The sales rep suggested taking out a
critical illness insurance policy, and she readily agreed. Ms W took out
£200,000 worth of critical illness insurance.
The sales representative talked Ms W through the application form, filling in
the answers on her behalf. When they came to the section about any incidences of
referral from a GP, Ms W was unsure what the question meant, and asked the sales
representative for clarification. According to Ms W, the sales rep told her that
she only needed to mention a referral if it related to a serious matter. Ms W
didn’t think it was worth mentioning the GP referral for the flaky skin, since
she thought it was probably just eczema. She didn’t mention it so it didn’t go
on the form. Ms W signed the form after completion and she applied for the
Standard Life policy believing that she had provided all the required
information.
Ms W soon received notification that she was insured for £200,000 in case she
developed a critical illness.
Two years later – Ms W learnt that she had skin cancer, and major surgery
quickly followed to try and remove the cancer. Ms W naturally made a claim on
her critical illness policy, for which she fully expected to receive a £200,000
payout.
Soon after, Ms W received the rejection letter from Standard Life – the claim
was rejected on the grounds of “reckless non-disclosure”. As far as the insurer
was concerned, Ms W had withheld information on the application form, and this
had invalidated her claim.
As you no doubt have realised, Ms W should have mentioned the GP referral to a
dermatologist – and her failure to mention it resulted in a severe penalty. How
could she have made such a mistake?
Two major errors were made: br>
1. When Ms W was asked to give details of any referrals she asked the sales rep
what kind of referrals they meant. She was advised that she only needed to
mention referrals relating to serious conditions. This advice was incorrect. The
question asked for details of “all occasions her GP had referred her for tests
or treatments”. ALL OCCASIONS means ALL – whether they were thought to be
serious or not. The insurance company needs to know absolutely everything they
ask for on the application form, and Ms W unfortunately did not provide that,
thanks to the sales rep’s advice.
2. The GP did not give Ms W any indication that the flaky skin could be
something serious, a fact that the GP stood by later. Ms W did not realise that
the skin condition could be anything other than eczema, and so when told that
she only needed to give details of referrals relating to serious conditions, she
truly believed that her dermatologist referral was not worth putting on the
form. She made this decision based on advice given by the sales rep, and it was
a genuine mistake on her part.
Taking the above story into account, we think that Standard Life should realise
that Ms W made an honest mistake, and did not deliberately withhold any
information. The sales rep did not give the right advice, and Ms W followed that
bad advice in good faith. It wasn’t her fault, and Standard Life should relax
the penalty in this particular case.
Make sure it doesn’t happen to you
Filling out a life or critical illness insurance application form has to be
taken very seriously indeed. You must read every single question and answer each
one providing all the necessary information and detail. Withholding information
is not an option, don’t be tempted by the thought of cheaper premiums because on
making a claim, you will be found out and the claim will be invalid. Don’t take
that risk!
Hopefully, Standard Life will see that Ms W did not deliberately mislead them,
and they will give her the payout she deserves.
People that do deliberately mislead the insurers do deserve what they will
eventually get – nothing.
NB: Standard Life rejects 5%, Friends Provident rejects 15% and Legal & General
rejects 16% of all critical illness claims because of policyholders withholding
information (whether deliberately or not). The insurance industry realise that
they need to do something to address the situation, and are currently developing
new ways to get information from applicants, and to publicise the severe
penalties for not providing full and accurate information.
About the Author:
Michael writes financial articles for Life Insurance Quotes Online who offer
life insurance and Mortgages
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