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Tell The Insurers Everything When You Apply For Life And Critical Illness
Insurance.
By: Michael Challiner
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 Standard Life 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.
The sales representative produced the form and went through it, question by
question, writing down Mrs A's answers for her. When it came to the question
asking Mrs A to disclose all occasions her GP had recommended referrals for
tests or treatments, Mrs A asked the sales representative what Standard was
asking for. Mrs A alleges that the representative replied that Standard only
needed details of appointments that related to serious conditions. Mrs A did not
believe that her referral for what she thought had been eczema, fell into that
category - so she did not mention it. She then signed the form honestly
believing that she had disclosed everything Standard Life had required.
Standard subsequently accepted her application and issued the £200,000 Critical
Illness Insurance policy.
• 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.
• Standard Life 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 Issues
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?
It seems that two aspects conspired to create the situation: Standard Life's
sales representative told Mrs A that the question on the application form asking
for “all occasions her GP had referred her for tests or treatments” as only
relating to serious conditions. That interpretation was fundamentally wrong. The
question asked for ALL OCCASIONS. These questions are worded carefully and ALL
means ALL - it is not asking the applicant to make a personal judgement as to
whether the grounds for the referral were serious or not. The representative was
clearly wrong.
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. Standard Life's 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 Standard Life 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.
However, those applicants who deliberately withhold information from their
insurer or who provide misleading information, do not.
Postscript : Reports show that Standard Life 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.
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