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 isinsensitive hassle or apparent non co-operation from your insurer. But
according to numerous newspaper articles, that's precisely what'shappening. The core problem is that before they'll pay out, the insurer
will always want to make exhaustive enquiries about your past healthrecord. Whilst you'll have provided them with lots of similar
information when you initially applied for the cover, the insurers willnow insist that all the information is rechecked. And if at the time
yousaid you weren't a smoker, they'll now want this verified by your
doctor.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 entiretruth about your health when you first applied. This means that now
you've claimed, they'll crawl over your medical records in great detailchecking that you disclosed everything on your application. Every small
and apparently insignificant detail will be subject to intensescrutiny.
The problem is that their reams of correspondence can be quiteupsetting
for you.The insurers defend their procedures saying that they need to be
certainthat when they accepted the business, you disclosed the full truth
aboutthe factors affecting your health. They want to be sure that you didn't
cheat by omitting some information in order to dupe the company intoissuing a policy when they otherwise might not, or to help you qualify
for a lower premium. Either way, non-disclosure as they call it, ischeating and a valid reason for them refusing your claim. It doesn't
even matter if the information you omitted ultimately had nothing to dowith the illness that occasioned the claim. The insurers position is
that every piece of information you provide was used to work out yourpremium 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 isclassed as an "early claim" and the insurers are particularly watchful
for policyholders who took out the critical illness insurance alreadysuspecting that that they were already ill.
Bad press for critical illness insurers
The problem is that all this intense scrutiny attracts a very bad
press.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 softeningthe
enquiry process and they must liase much more closely with theirclaimants. 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 insurerswho
publish the lowest rejection rates and others have withdrawn frommaking
any application.In practice, avoiding insurers who publish high refusal rates has
littlebenefit. That's because the published figures can be misleading. The
latest figures show that Scottish Equitable Protect has refused to payout on 28% of critical illness claims followed closely by Friends
Provident at 25%. If you compare these figures with Scottish Providentat 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 inthe critical illness market. As rejection rates are highest with
policies that have only run for a few years, then companies that arenew
to the critical illness market will automatically have the highestrejection rates. This leaves companies such as Guardian Financial
Services looking good with a rejection rate of just 10%. The truth isthat 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 insuranceplays an important part in protecting family finances but people are
being deterred from buying it, leaving their family unit exposed ifthey
become seriously ill. After all, if the main income provider is takenseriously ill, the family's income can plummet. That means that the
tax-free lump sum paid out by these policies can become central to thefamily's financial survival.
Finding the right critical illness insurance
Our advice is if you think you need critical illness cover press on.
Butbe aware that these policies vary a lot in the cover they offer - so
straight price comparisons aren't really meaningful. Basic plans willcover one or more of the most serious conditions but comprehensive
planscover many more - for example:
Alzheimer's disease
Aorta graft surgeryAplastic anaemia
Bacterial MeningitisBenign brain tumour
BlindnessCancer
CardiomyopathyChronic lung disease
ComaCoronary artery by-pass surgery
Creutzfeldt-Jakob diseaseDeafness
DementiaHeart attack
Heart valve replacement or repairHIV or AIDs from an assault, blood transfusion, occupational duties or
accidentKeyhole heart surgery
Kidney failureLoss of independent existence
Loss of limbsLoss of speech
Major organ transplantMotor Neurone disease
Multiple SclerosisParalysis/Paraplegia
Parkinson's diseaseProgressive Supranulcear Palsy
StrokeThird degree burns
Total and Permanent DisabilityCover for children
This complexity means that you really need independent advice. There
areplenty of web sites that can help you. Just search for "critical
illnessinsurance" 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 Assurance
ADVERTISE IN OUR NEW DIRECTORY
Please feel free to leave a comment about this page
Was this page useful? Do you have something to add? Do you disagree?
If your comments meet our
guidelines then we will publish them (you do not need to register!)
Or why not tell a friend and email
this
page to someone