Life and Critical Illness Insurance - Tell the insurers everything when you apply
The failure to disclose information, especially medical information, is the most common reason why an insurer will reject a claim on a life or critical illness policy. To help underline some issues, we want to tell you a true story - but we've concealed the policyholders' name and a few other aspects to preserve anonymity.
Example of why you should disclose all information for Life Insurance...
Mrs A was fighting a secondary infection following surgery to remove cancerous lymph nodes in her groin when she received further bad news. Her critical illness insurer was refusing to pay out the £200,000 she was expecting. To understand why and the issues involved it's useful to understand how the events unfolded.
The events that led to non disclosure of information to the life insurance company...
The sales representative produced the life insurance application form and went through it, question by question, writing down Mrs A's answers for her. When it came to the question asking Mrs A to disclose all occasions her GP had recommended referrals for tests or treatments, Mrs A asked the sales representative what Standard Life Insurance was asking for. Mrs A alleges that the representative replied that Standard Life Insruance only needed details of appointments that related to serious conditions. Mrs A did not believe that her referral for what she thought had been eczema, fell into that category - so she failed to disclose this information. She then signed the form honestly believing that she had disclosed everything Standard Life Insurance had required.
Standard subsequently accepted her application and issued the £200,000Critical Illness Insurance policy.
disclose the information of her cancelled appointment with the dermatologist.
The Issues of non disclosure of information to life insurance companies...
The events that followed showed that Mrs A's application should have included her referral to the dermatologist. So why didn't she disclose the information?
It seems that two aspects conspired to create the situation: Standard Life's sales representative told Mrs A that the question on the application form asking for "all occasions her GP had referred her for tests or treatments" as only relating to serious conditions. That interpretation was fundamentally wrong. The question asked for ALL OCCASIONS. These questions are worded carefully and ALL means ALL - it is not asking the applicant to make a personal judgement as to whether the grounds for the referral were serious or not. The representative was clearly wrong in the information they gave.
Secondly, the GP did not apparently convey to Mrs A the potential seriousness of her flaky skin and her referral to the dermatologist. If, when the insurance application was being completed, Mrs A was unaware that her condition was potentially serious and the representative said the referral question only related to serious conditions, Mrs A can hardly be held responsible for not disclosing that information.
In our view, and on the basis of the information provided to us, Mrs A is not to blame. Standard Life's representative made the vital error. He gave incorrect guidance and information on what the question at the heart of the dispute, was asking for. In our view Standard Life Insurance should pay out.
The lessons to be learnt from non disclosure of information to life insurance companies...
Always very carefully read each question on an insurance application form -and answer the question FULLY and ACCURATELY. Do not be tempted to be economical with the truth. If you do omit something they ask for, the life insurance company can rightfully claim that you mislead them by omission. Never be tempted to omit some information in order to qualify for a cheaper premium. You might get a cheaper premium, but that's a false economy if a subsequent claim is rejected.
We hope Mrs A will get her payout as she was mislead by circumstances beyond her control. We believe she acted honestly. She deserves her payout and our best wishes.
However, those applicants who deliberately withhold information from their insurer or who provide misleading information, do not .
Postscript : Reports show that Standard Life refuse 5% of all Critical Illness claims due to non-disclosure. Some other insurers have much higher figures - Legal & General reject 16% and Friends Provident reject 15%. The insurance industry is trying to improve this situation by the ways they seek information from applicants and by the way the penalties for no-disclosure are explained.
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