Critical Illness Insurance

The non-disclosure problem with Critical Illness Policies

If you're in the unfortunate position of having to make a claim on your

critical illness insurance policy, the last thing you want is

insensitive hassle or apparent non co-operation from your insurer. But

according to numerous newspaper articles, that's precisely what's

happening. The core problem is that before they'll pay out, the insurer

will always want to make exhaustive enquiries about your past health

record. Whilst you'll have provided them with lots of similar

information when you initially applied for the cover, the insurers will

now insist that all the information is rechecked. And if at the time


said you weren't a smoker, they'll now want this verified by your


Verifying your claim on critical illness insurance

The reasons are obvious. They're faced with a big claim, typically way

over £100,00, and they want to be certain that you told them the entire

truth about your health when you first applied. This means that now

you've claimed, they'll crawl over your medical records in great detail

checking that you disclosed everything on your application. Every small

and apparently insignificant detail will be subject to intense


The problem is that their reams of correspondence can be quite


for you.

The insurers defend their procedures saying that they need to be


that when they accepted the business, you disclosed the full truth


the factors affecting your health. They want to be sure that you didn't

cheat by omitting some information in order to dupe the company into

issuing a policy when they otherwise might not, or to help you qualify

for a lower premium. Either way, non-disclosure as they call it, is

cheating and a valid reason for them refusing your claim. It doesn't

even matter if the information you omitted ultimately had nothing to do

with the illness that occasioned the claim. The insurers position is

that every piece of information you provide was used to work out your

premium and any omission affects the calculation.

The insurers are particularly distrustful if the claim arrives within

the policy's first five years. Any claim arising during this period is

classed as an "early claim" and the insurers are particularly watchful

for policyholders who took out the critical illness insurance already

suspecting that that they were already ill.

Bad press for critical illness insurers

The problem is that all this intense scrutiny attracts a very bad


If you're very sick and distressed, the last thing you want is lots' of

questions and high-handed hassle from your insurer.

There's undoubtedly a conflict here. If they are to neutralise the bad

press, the insurance companies need to work much harder at softening


enquiry process and they must liase much more closely with their

claimants. Insurers must present a much softer centre at what is a most

distressing time for their claimants.

All this adverse PR has had two effects on the critical illness

insurance market. Applicants have apparently been favouring insurers


publish the lowest rejection rates and others have withdrawn from


any application.

In practice, avoiding insurers who publish high refusal rates has


benefit. That's because the published figures can be misleading. The

latest figures show that Scottish Equitable Protect has refused to pay

out on 28% of critical illness claims followed closely by Friends

Provident at 25%. If you compare these figures with Scottish Provident

at 13.7%, many potential policyholders can be forgiven for favouring

Scottish Provident. But that's not necessarily the best decision.

The problem with interpreting these figures is that the figures

themselves can be distorted by how long the insurer has been active in

the critical illness market. As rejection rates are highest with

policies that have only run for a few years, then companies that are


to the critical illness market will automatically have the highest

rejection rates. This leaves companies such as Guardian Financial

Services looking good with a rejection rate of just 10%. The truth is

that the Guardian has been in the market for over 15 years and has a

mature book of business.

And it's a pity that all this negative publicity has undermined

confidence in critical illness insurance. In our view, this insurance

plays an important part in protecting family finances but people are

being deterred from buying it, leaving their family unit exposed if


become seriously ill. After all, if the main income provider is taken

seriously ill, the family's income can plummet. That means that the

tax-free lump sum paid out by these policies can become central to the

family's financial survival.

Finding the right critical illness insurance

Our advice is if you think you need critical illness cover press on.


be aware that these policies vary a lot in the cover they offer - so

straight price comparisons aren't really meaningful. Basic plans will

cover one or more of the most serious conditions but comprehensive


cover many more - for example:

Alzheimer's disease

Aorta graft surgery

Aplastic anaemia

Bacterial Meningitis

Benign brain tumour




Chronic lung disease


Coronary artery by-pass surgery

Creutzfeldt-Jakob disease



Heart attack

Heart valve replacement or repair

HIV or AIDs from an assault, blood transfusion, occupational duties or


Keyhole heart surgery

Kidney failure

Loss of independent existence

Loss of limbs

Loss of speech

Major organ transplant

Motor Neurone disease

Multiple Sclerosis


Parkinson's disease

Progressive Supranulcear Palsy


Third degree burns

Total and Permanent Disability

Cover for children

This complexity means that you really need independent advice. There


plenty of web sites that can help you. Just search for "critical


insurance" and make sure you can talk to an adviser before you buy.

Resource Box

Michael Challiner is the exclusive finance editor writing for Brokers

Online who offer their clients online access to Critical Illness and



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"we are batteling with them at the moment it seems very straight forword to us how ever the company are dragging it out scottish provident we are with my had to have an emergency heart valve replacement and before he did not know who his doctor was he never had to see him but this is the third time they have gone back to the doctor when i speak to them its like pulling teeth trying to get information from them"

judith phillips