The non-disclosure problem with Critical Illness Policies
If you're in the unfortunate position of having to make a claim on yourcritical illness insurance policy, the last thing you want is
insensitive hassle or apparent non co-operation from your insurer. Butaccording to numerous newspaper articles, that's precisely what's
happening. The core problem is that before they'll pay out, the insurerwill always want to make exhaustive enquiries about your past health
record. Whilst you'll have provided them with lots of similarinformation when you initially applied for the cover, the insurers will
now insist that all the information is rechecked. And if at the timeyou
said you weren't a smoker, they'll now want this verified by yourdoctor.
Verifying your claim on critical illness insurance
The reasons are obvious. They're faced with a big claim, typically wayover £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 nowyou've claimed, they'll crawl over your medical records in great detail
checking that you disclosed everything on your application. Every smalland apparently insignificant detail will be subject to intense
scrutiny.The problem is that their reams of correspondence can be quite
The insurers defend their procedures saying that they need to becertain
that when they accepted the business, you disclosed the full truthabout
the factors affecting your health. They want to be sure that you didn'tcheat by omitting some information in order to dupe the company into
issuing a policy when they otherwise might not, or to help you qualifyfor a lower premium. Either way, non-disclosure as they call it, is
cheating and a valid reason for them refusing your claim. It doesn'teven matter if the information you omitted ultimately had nothing to do
with the illness that occasioned the claim. The insurers position isthat 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 withinthe policy's first five years. Any claim arising during this period is
classed as an "early claim" and the insurers are particularly watchfulfor 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 badpress.
If you're very sick and distressed, the last thing you want is lots' ofquestions and high-handed hassle from your insurer.
There's undoubtedly a conflict here. If they are to neutralise the badpress, the insurance companies need to work much harder at softening
theenquiry process and they must liase much more closely with their
claimants. Insurers must present a much softer centre at what is a mostdistressing time for their claimants.
All this adverse PR has had two effects on the critical illnessinsurance market. Applicants have apparently been favouring insurers
whopublish the lowest rejection rates and others have withdrawn from
In practice, avoiding insurers who publish high refusal rates haslittle
benefit. That's because the published figures can be misleading. Thelatest figures show that Scottish Equitable Protect has refused to pay
out on 28% of critical illness claims followed closely by FriendsProvident at 25%. If you compare these figures with Scottish Provident
at 13.7%, many potential policyholders can be forgiven for favouringScottish Provident. But that's not necessarily the best decision.
The problem with interpreting these figures is that the figuresthemselves can be distorted by how long the insurer has been active in
the critical illness market. As rejection rates are highest withpolicies that have only run for a few years, then companies that are
newto the critical illness market will automatically have the highest
rejection rates. This leaves companies such as Guardian FinancialServices 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 amature book of business.
And it's a pity that all this negative publicity has underminedconfidence in critical illness insurance. In our view, this insurance
plays an important part in protecting family finances but people arebeing deterred from buying it, leaving their family unit exposed if
theybecome seriously ill. After all, if the main income provider is taken
seriously ill, the family's income can plummet. That means that thetax-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.But
be aware that these policies vary a lot in the cover they offer - sostraight price comparisons aren't really meaningful. Basic plans will
cover one or more of the most serious conditions but comprehensiveplans
cover many more - for example:
Alzheimer's diseaseAorta graft surgery
Aplastic anaemiaBacterial Meningitis
Benign brain tumourBlindness
Chronic lung diseaseComa
Coronary artery by-pass surgeryCreutzfeldt-Jakob disease
Heart attackHeart valve replacement or repair
HIV or AIDs from an assault, blood transfusion, occupational duties oraccident
Keyhole heart surgeryKidney failure
Loss of independent existenceLoss of limbs
Loss of speechMajor organ transplant
Motor Neurone diseaseMultiple Sclerosis
Progressive Supranulcear PalsyStroke
Third degree burnsTotal and Permanent Disability
Cover for children
This complexity means that you really need independent advice. Thereare
plenty of web sites that can help you. Just search for "criticalillness
insurance" and make sure you can talk to an adviser before you buy.
Michael Challiner is the exclusive finance editor writing for BrokersOnline 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"