Failure to disclose information, especially medical information, is the most common reason an insurer will reject a claim on a life or critical illness policy. To highlight some issues, we want to tell you a true story - but we've withheld the names of policyholders and a few other aspects to preserve anonymity.
Ms A was battling a secondary infection after surgery to remove cancerous lymph nodes in her groin when she received new news. Her critical illness insurer refused to pay the £200,000 she was expecting. To understand why and the issues involved, it helps to understand how events unfolded.
• In June 2001, Mrs A visited her GP after discovering a patch of scaly skin on her back. Madame thought it was eczema. During a brief consultation, his GP thought he should be looked at and recommended a referral to a dermatologist. But soon after, the flaky skin healed and Ms canceled the appointment with the dermatologist. Apparently her GP expressed no major concerns and a few years later admitted that Mrs AP was being cruel ignoring the urgency of the referral.
• Nine weeks later, a Standard Life sales representative made a routine visit to Ms. A at her home. As Ms A was now alone with a young family, the representative looked at Ms A's life insurance cover and suggested she should also have a £200,000 critical illness policy. Ms a thought that sounded a very good idea and willingly agreed there.
The sales rep produced the form and went through it question by question, writing down Ms. A's answers for her. Regarding the issue of asking Ms A to disclose any occasions that her GP had recommended referrals for tests or treatments, Ms A asked the sales rep the standard was asking. Ms. A alleges that the representative responded that the standard only required details of appointments related to serious conditions. Ms A did not believe her referral for what she thought was eczema fell into this category - so she did not mention it. She then signed the form honestly believing she had disclosed everything standard life needed.
Standard subsequently accepted his request and issued the £200,000 critical illness health insurance policy.
• Two years later, Mrs. A had skin cancer. Major surgery soon followed to remove the cancer. As her critical illness policy included coverage for her cancer, Ms. A then made what she thought was a valid claim.
• Standard Life later dismissed her claim on the basis of 'reckless non-disclosure' - insurers' lingo for Ms A's failure to disclose her canceled appointment with the dermatologist.
The problems
The events that followed showed that the application of MRS A should have included his reference to the dermatologist. So why didn't she leak the information?
It appears that two aspects conspired to create the situation: the Standard Life sales representative told Ms A that the question on the claim form asking for 'any occasions that her GP had referred her for tests or treatments” as linking only to serious conditions. This interpretation was fundamentally wrong. The question asked every opportunity. These questions are carefully worded and all means - it does not ask the applicant to make a personal judgment as to whether or not the grounds for referral were serious. The rep was clearly wrong.
Second, the GP apparently failed to convey to Ms A the potential seriousness of her flaky skin and her referral to the dermatologist. If, when the application for insurance was completed, Mrs A did not know that her condition was potentially serious and the representative said that the reference question related only to serious conditions, Mrs A can hardly be held responsible for not disclose this information.
In our opinion, and based on the information provided to us, Ms. A is not to blame. The representative of standard life made the vital mistake. He gave incorrect advice on what the issue at the heart of the dispute was asking. In our view, standard living should pay off.
Lessons to learn
Always read every question on an insurance application form very carefully - and answer the question fully and accurately. Don't be tempted to be economical with the truth. If you omitsomething they ask for, the insurance company can rightly claim that you are misleading them by omission. Never be tempted to omit certain information in order to qualify for a cheaper premium. You might get a cheaper premium, but it's a false economy if a later claim is denied.We hope that Mrs. A will get her payment because she was in error by circumstances beyond her control. We believe she acted honestly. She deserves her payment and our best wishes.
However, applicants who deliberately withhold their insurer's information or provide misleading information do not.
Postscript: reports show that Life Standard Denies 5% of all critical illness claims due to non-disclosure. Some other insurers have much higher numbers - Legal & General rejects 16% and Friends Provident rejects 15%. The insurance industry tries to improve this situation by the way they seek information from applicants and by the way the penalties for non-disclosure are explained.
