Insurers promise to pay more claims
Insurance companies have promised to pay more critical illness, income protection and life insurance claims in full even in cases where the policyholder accidentally failed to reveal their full medical history.
In the past, insurers have been dogged with controversy because many would refuse to pay claims if they discovered the customer hadn’t fully revealed their medical history - even if the non-disclosed conditions were unrelated to their claim. For example, a policyholder who forgot to tell their insurance company that they had suffered asthma as a child might have found their insurance claim for a different medical condition rejected.
Insurance companies defended this practice because of concerns that some policyholders may deliberately withhold information.
But under a new industry-led initiative between insurance companies, the Financial Ombudsman Service and trade body the Association of British Insurers, policyholders who have innocently withheld information may not find themselves out of pocket.
Insurers have agreed to pay such claims in full even if, had they known about the non-disclosed medical condition, a different insurance product or premium would have been recommended.
But the ABI says this isn’t a green light for people to deliberately withhold information. If an insurer believes the policyholder failed to tell them their full medical history for dishonest reasons they can still reject the claim.
Stephen Haddrill, director general of the ABI, says the number of claims rejected because of non-disclosure will fall as a result of the move.
And Bernie Hickman, chair of the ABI committee that developed the initiative and managing director of protection at Legal & General, says: “Essentially we want to ensure that customers are given the benefit of the doubt when it comes to judging whether to decline claims due to medical information not being disclosed to the insurer. Customers should have every confidence that insurers will treat them fairly when they make a claim.”
However, the new initiative is not retrospective and will not help those people whose claims have been turned down in the past for innocent non-disclosure.
The ABI suggests that consumers who feel they were unfairly rejected contact the Financial Ombudsman Service.
Generally thought of as being interchangeable with life assurance, but isn’t. Life insurance insures you for a specific period of time, at a premium fixed by your age, health and the amount the life is insured for. If you die while the policy is in force, the insurance company pays the claim. However, if you survive to the end of the term or cease paying the premiums, the policy is finished and has no remaining value whatsoever as it only has any value if you have a claim. For this reason, life insurance is much cheaper than life assurance (also called whole of life).
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.
Association of British Insurers
Established in 1985, the ABI is the trade body for UK insurance companies. It has more than 400 member companies that provide around 90% of domestic insurance services sold in the UK. The ABI speaks out on issues of common interest and acts as an advocate for high standards of customer service in the insurance industry. The ABI is funded by the subscriptions of member companies.