On 2nd December Jill Insley wrote an article ( http://t.co/1Cx2wAzR ) in The Observer about Nic Hughes whose critical illness claim has been turned down by Friends Life. A campaign has started to get Friends Life to overturn their decision and backed by @stephenfry on twitter the campaign is set to gain momentum.
We have decided to support the campaign and we want to explain our reasons why.
As we have previously expressed, we have had concerns for some time that the way that life insurance companies currently work may be leaving some customers exposed to the danger of a claim being turned down. When it comes to critical illness and life insurance there can be nothing worse than thinking you have done the right thing and protected your family with personal insurance cover only to find out when its too late that the insurance company has thrown out the claim due to ‘non disclosure’.
We accept that there are some occasions where due to deliberate non disclosure an insurance company will be quite within their rights to decline a claim.
However we believe there currently exists a grey area where it is much less clear that a customer has deliberately non disclosed. Misunderstandings concerning disclosure can and do arise and in the case of Nic Hughes it looks as though this might have been part of the problem.
We believe that the current underwriting practices used by most life insurance companies are adding to this problem. This is because most life companies often deliberately make the decision not to write for further medical information from the client’s GP at the application stage, even though the client might have disclosed one or more medical conditions on the application form. For medical disclosures such as heart disease and cancer, life insurance companies will nearly always prefer to write out to the client’s GP for further medical information. But there are many potentially ‘less serious’ conditions where the insurance company may decide not to bother with this stage of the process and to offer acceptance terms straight away. In fact life insurance companies adopt this approach for the majority of applications.
The problem is that where there is no independent medical verification there can be an increased risk of misunderstanding and therefore of a claim being declined, which is potentially catastrophic for the policy holder.
Life insurance companies argue that if they were to write out for medical evidence in a greater number of cases that this would add to their costs and that it would delay customers obtaining cover. They say that customers want cover quickly and that if they can’t get it quickly they will be put off taking out insurance.
We disagree strongly and so do most of our clients. We think that the argument that the ‘client needs a fast turnaround’ is a smoke screen and that there may be other motivating factors.
Here @MoneysworthUK our clients tell us that the most important thing for them is to know that their cover is valid. Getting the job done right is much more important than getting a quick fix. In the main they positively welcome a GP report as part of the underwriting process, because it makes them feel safer that they haven’t accidentally left something out. That’s probably not surprising when you consider that the majority of our clients already have an existing health condition such as diabetes, heart disease, mental health etc.
In the case of Nic Hughes, had the life insurance company written out to the client’s GP for a report before making their underwriting decision then the current situation could have been avoided. If they had declined or postponed cover then Nic could have explored other avenues to see if other options were available. Instead of which the insurance company seems to have taken the easy route which has turned out to be easy for them but very difficult for Nic and for his family.
In Nic’s case we think Friends Life should settle the claim. If you would like to sign the petition here is the link https://t.co/7KlFyuOL
Furthermore we think that Nic’s case illustrates the need for a reassessment of underwriting procedures across all life insurance companies. One possible way of dealing with this issue would be to make insurance companies fully liable for claims arising after a limited initial period – that would change the way life insurance companies approached their underwriting processes as they would not be able to rely on non disclosure at the claim stage. But it would leave customers knowing where they stand.
In the meantime until life insurance companies change their ways we think that ‘grey’ cases should be settled in favour of the applicants.
I have just read an article in todays Cover Magazine here http://tinyurl.com/7dlbkwe in which Zurich’s head of underwriting is quoted as stating that huge numbers of applications received contain ’embellishments’ of the truth about applicants’ health details.
Why would anyone wish to take out life insurance using information which if succesfully contended at claim stage by the life company might lead to the claim being disallowed? How pointless is that? In stead of (presumably) saving a bit on the premiums, non disclosure risks wasting every penny of the premiums.
Of course in such cases it won’t be the person who is insured who will ever know. It will just come as an extra horrible shock to those who are left. Messy!
As so many of our clients at Moneysworth have pre existing health conditions (including diabetes, heart conditions and other health conditions), it is common for life insurance companies to write to our client’s doctors for medical information before making a final decision. Though on the face of things this might be seen to cause a degree of anxiety during the waiting period, the reality is that at the end of the process clients can feel extra peace of mind, knowing that the insurance company holds a report from their doctor.
In fact in many cases clients say to us that they would prefer the life company to write to their GP so that they can feel safe knowing that medical information HAS been disclosed!
And of course by using Moneysworth our clients know that we have properly researched the market to find the best solution for them individually. Which is important when you consider that different insurance companies charge widely different prices for people with the same health conditions.
So if you have a health condition and want to apply for life insurance make sure that you fully disclose your health information and if possible use the services of a life assurance broker who really does specialise in helping people with pre existing health conditions. That way you will know that you are fully covered and at a good price.