Critical Illness Insurance The Non-Disclosure Problem

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

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 scrutiny. The problem is that their reams of correspondence can be quite upsetting for you.

The insurers defend their procedures saying that they need to be certain that when they accepted the business, you disclosed the full truth about 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.

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 softening the 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 who publish the lowest rejection rates and others have withdrawn from making any application.

In practice, avoiding insurers who publish high refusal rates has little 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 new 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 they 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.

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 - so straight price comparisons aren't really meaningful. Basic plans will cover one or more of the most serious conditions but comprehensive plans cover many more – for example:

Alzheimer's disease
Aorta graft surgery
Aplastic anaemia
Bacterial Meningitis
Benign brain tumour
Blindness
Cancer
Cardiomyopathy
Chronic lung disease
Coma
Coronary artery by-pass surgery
Creutzfeldt-Jakob disease
Deafness
Dementia
Heart attack
Heart valve replacement or repair
HIV or AIDs from an assault, blood transfusion, occupational duties or accident
Keyhole heart surgery
Kidney failure
Loss of independent existence
Loss of limbs
Loss of speech
Major organ transplant
Motor Neurone disease
Multiple Sclerosis
Paralysis/Paraplegia
Parkinson's disease
Progressive Supranulcear Palsy
Stroke
Third degree burns
Total and Permanent Disability
Cover for children

This complexity means that you really need independent advice. There are plenty of web sites that can help you. Just search for “critical illness insurance” and make sure you can talk to an adviser before you buy.

Critical Illness Insurance Do you really need it? Or is it a waste of time?

<strong>GREAT NEWS! </strong> There's now a one in five chance of you winning the lottery before you retire.

Getting excited? Think it's just a matter of time before you win? Think again, it's not going to happen - but it got you thinking!

Now think of the same odds but this time about bad news. There is a 1 in 5 chance for men and a 1 in 6 chance for women that a long-term critical illness will prevent them from working. Sorry - this time it's true.

Insurance cannot change those odds but it can alleviate the potential financial wreckage caused by being unable to work through long-term illness and still having a family and home to support. 

Convention declares that every good family man should have life insurance. It's easily understood, it's accepted and your next door neighbour has it too. But what about it's close cousin critical illness insurance? You'll have to walk several streets to find someone who has it. Given the odds, why? After all it pays out a tax-free lump sum immediately an insured critical illness is diagnosed. 

The usual reason given is its expense. Yes it is more expensive than life insurance but after all it's providing cover for a greater risk. You're much more likely to experience a critical illness than die before your normal retirement age. Indeed, the average age for a claim is 47. So clearly there is much more to the public's resistance.

Not understanding the risks or “head in the sand syndrome” are certainly major factors. After all a lzheimer's disease, bacterial meningitis, brain tumours and leukaemia plus the long list of other illnesses typically covered by critical illness insurance, are not matters we care to think of nor know much about.

Could there be another reason? Well there have been repeated newspaper articles about people who claim on their critical illness policy only to have it turned down on an apparent technicality – the inference being that the insurance company cannot be trusted. Indeed, Standard Life freely admits that it turns down around 20 % of critical illness claims.

The truth is that behind every story of rejection there's a harrowing story of illness, distress and sorrow - and potential copy for the journalist. But that in itself, is not evidence that the insurance company is guilty of devious behaviour.

Yes insurance companies do make mistakes, but more often than not the claim was invalid from the outset. There are two main causes. Firstly, the policyholder is claiming for an illness that is not one of the critical illnesses scheduled in the policy documentation. Regrettable, but it's a fact that if the illness is not listed it isn't insured and the policy won't pay out.

The moral is to closely compare the illnesses covered by competing insurance companies and buy the one with the most extensive coverage of illnesses. If you don't, sods law will prevail …….

The second major reason for refusal is a failure to disclose all relevant matters on the original application form. For example, if the applicant fails to disclose in response to the insurance company's questions that his father a died of a heart attack aged 50 or that he is having medical tests for headaches, then the insurance company will wrongly assess the risks it is being invited to insure. Had the insurance company known this extra information they might have increased the premium, or asked the applicant to go for a medical examination, or waited for the outcome of tests, or even refused to provide cover. By failing to disclose, the applicant has effectively obtained cover on false pretences or at least on inaccurate information.

Thereby lies the second moral. Always provide the truth <em>and the full truth </em> on your application form. Anything remotely relevant to your medical condition must be disclosed.

All this points to the need for professional insurance advice. Critical Illness policies do vary and it can take an experienced eye to evaluate the best policy for your circumstances and pocket. This doesn't mean that you have to miss out on the discounted premiums available online - but do thoroughly talk it through with one of their telephone based advisers and do make sure you read the schedule of claimable illnesses when it arrives in the post.

Then sit back knowing you've taken another important step to protect your family's finances. Lets all hope that you're one of the majority who are happy never to claim.

It's now time to concentrate on enjoying life.

Critical Illness Insurance – The Press Are Giving Insurers A Hard Time.

Recent stories in the press have again lambasted the insurers over critical illness insurance. The core problem is that a critical illness claim is not as straightforward as, for example, a claim under life insurance. With life insurance it's going to be hard for the insurance company to argue that you're not dead!

By their very nature, critical illness claims are much more complicated. The insurer will need to satisfy itself that the claim is validated in three key areas before it meets the claim: -

Has the illness been correctly diagnosed?

Is the confirmed illness included in the schedule of insured critical illnesses covered by the policy?

Did the policyholder fully disclose their medical history and current state of health on their original application form?

On the first point, it's obviously in the policyholder's interest to verify the medical diagnosis - so there's rarely ever any conflict between the insurance company and the policyholder on that issue. It's the next two areas which the insurer needs to validate, where conflicts seem arise.

With constant development in the medical knowledge, from time to time there can be some situations where validation falls into a grey area – a policyholder will argue that their specific illness is insured whereas the insurer will argue that it isn't. Insurance companies are aware of this problem and they often change the wording in their policies in an attempt to clarify the scope of the cover and eliminate areas for dispute. Nevertheless, disputes do happen all too frequently and sparks fly when a policyholder thinks his illness is covered but the insurer disagrees.

A case in point comes before the Courts shortly. Mr Hawkins from Staffordshire is suing Scottish Provident for £400,000 under the terms of his critical illness policy. Basically, his medical advisers believe his illness is insured whereas the insurers' medical advisers disagree. If the Court find in favour of Mr Hawkins the press will have a field day - and the critical illness insurers will suffer further bad press they can sorely afford.

Another summons, filed recently in the High Court and again involving Scottish Provident, highlights the problem when an insurer considers that a claimant mislead them on his or her original application form. Our understanding is that if an applicant omits relevant information or provides misleading information on their application from, this amounts to obtaining insurance on false pretences. This summons has been issued on behalf of Thomas Welch from London who is suing Scottish Provident for £206,800. The issue goes back to 2000 when, a few years after first starting his critical illness policy, Mr Welch received confirmation that he was suffering from testicular cancer. The insurer refused the claim because of “non-disclosure alleging that Mr Welch had not been honest about his smoking habit. He does admit that he did smoke earlier in his life but is resolute in saying that he had long since given up when he applied for critical illness insurance. As such, Mr Welch believes that he did complete the application honestly.

We assume that the case will centre upon whether Mr Welch accurately answered the smoking questions on his application. Most insurers define “a smoker” as someone who has smoked, or has otherwise used, nicotine products within the previous 5 years. (Some insurance companies adopt a 1year cut off.) If Mr Welch had indeed smoked during the specified years, he would have been obliged to disclose such information on the application and the insurer would have priced his insurance accordingly. In this context, it is relevant to note that smokers are charged as much as 65% more for critical illness over than non-smokers. We anticipate that Mr Welch's lawyers will argue either that he did not smoke during the period in question or he omitted the smoking information by pure oversight and in any event, his past smoking is not irrelevant to his testicular cancer. Interesting issues and we'll let you know the outcome.

Mr Hawkins case is fundamentally different. It illustrates the problems that can arise if policy documents imprecisely describe an illness or if the technical diagnosis of an illness provides the scope for medical professionals to disagree. Either way the issues are entirely outside the policyholders control at a distressing time for them and their families and we must appreciate their anguish. The long-term solution must lie in improving the medical definitions within the policy. It is probable that this will result in more medical jargon that the average man in the street will find difficult to understand - but perhaps that is preferable to what Mr Hawkins is going through.

Mr Welch's court case must stand as a clear reminder to everybody that applications for insurance must always be totally accurate and completed in good faith. We recognise that in some cases this may still leave room for dispute (and Mr Welch's case may be an example), but if an applicant fails to complete the forms accurately, they are taking the great risk and any claim they make could be rejected.

Rightly or wrongly, the newspapers have a history of giving the insurance companies a hard time, casting them as heartless big business. This serves to reinforce the public's feeling that insurance companies are devious and not to be trusted - especially it seems, in respect of critical illness insurance. This view is reinforced by the fact that around 20-25% of critical illness claims are rejected (although this rejection rate does vary between insurers). This issue is something that insurers must come to grips with – it's bad for clients and undermines confidence in insurance - and that must be bad for the development of the insurance industry.

In fact to put no finer point on it, it's a tragedy. As many as 1 in 6 women and 1 in 5 men will be diagnosed with a critical illness before their normal retirement age*. As such, critical illness insurance is vastly important for the protection of family finances. The problems we have highlighted are obviously contributing to a situation where almost everybody needs critical illness insurance, but fewer and fewer of us are taking it up.

(* Source: Munich Re.)

Critical Illness Insurance – Another Scam?

Unless you have substantial savings, even in the UK, contacting a serious illness, such as cancer, can be a very costly affair. Above all, not only do you need to consider how contracting such a critical illness will affect your savings in any medical care bills, but you also need to consider that you may well not be able to earn any income to cover you day-to-day expenditure. As a result, making sure you take out a critical illness insurance may well be one of the wisest and astute financial decisions you make.

What Is Critical Illness Insurance?

In short, a critical illness insurance policy is very much like any other insurance policy you take out. Here, however, your premiums go towards insuring that you do not contract a critical illness. In the event that you do contract a critical illness, your UK insurance provider will pay you out a tax-free lump sum to help you cover the day-to-day costs of having to live with your new medical condition.

Are There Any Limitations With Critical Illness Insurance?

Yes; it is essential that you look at the list of critical illnesses that your insurance policy covers, as these will be the only illness under which the policy will pay-out. In other words, the UK insurance provider will not pay-out on the policy simply because you have a doctor’s certificate that you have a critical illness, it needs to be one of the designated critical illness.

Moreover, if you are considered by the UK insurance provider to be a high risk – for example, if you smoke – then it is likely that either you will not be able to obtain the critical illness insurance, or your insurance premiums will be significantly higher than if this were not to the case. Importantly, you will need to disclose whether or not you have any existing conditions, in which case these will likely not be included, and whether or not your family has a history of the illnesses set out in the policy, in which case this will likely affect your premium payments.

How Will I Be Paid?

As mentioned, with a critical illness insurance your UK insurance underwriter will pay you out a lump-sum tax free amount once you contract one of the critical illnesses listed in the policy. Having paid out the lump-sum amount, your relationship with the UK insurance provider will come to an end. In other words, you will not have an ongoing relationship with the insurance provider paying you intermediate payments.

Is It Worth Having Critical Illness Insurance?

The question of whether or not there is any value in you having a critical illness insurance will depending largely on your age, expenses, and whether or not you have any other insurance. Essentially, critical illness insurance covers an area for which other types of insurance can be obtained. However, unlike other types of insurance, this is a very specific insurance policy paying out for a very specific purpose. That said, there is a strong argument that you can never really have too much insurance and will numbers seemingly showing that more and more of us contracting critical illnesses as we grow as an aging population, this type of UK insurance is always useful.

Critical Illness Insurance. Critically Important – Time To Take Cover

Back in 1999, the Imperial Cancer Research Fund stated that one in every three people in Britain will be diagnosed with cancer at some point in their life. With rapid medical advances the chances of survival from a major illness are improving but the consequences of suffering such an illness continue to be substantial and life-changing.

Critical illness insurance policies are designed to help you cope with the changes which will be necessary should you be diagnosed with a “qualifying medical condition”. Most policies will pay out following a diagnosis of heart disease, cancer, stroke, renal failure, paralysis, major organ transplant and coronary artery bypass surgery as well as a range of other conditions. There is normally a one-off tax free payment which is intended to assist you with costs, typically the need to adapt your home or car or maybe re-train for a different occupation. It's not only the bread-winner that can benefit from this type of cover and you should take account of child care and housekeeping costs which would be involved should Mum be out of action.

Unfortunately, at a time when most people are suffering from the shock of learning that they have been diagnosed with a critical illness, they and their families may learn some additional disturbing news. The insurance industries latest figures show that, on average, around a quarter of all claims are rejected!

As soon as a claim is made, the insurance company will request a huge amount of information from your doctor. It's quite likely that much of this information is not relevant to the illness for which the claim relates. The insurer is using this information to ascertain whether or not the insured has been completely truthful on the original insurance application form.

The reason for this is what the insurers call non-disclosure and if any medical information has been omitted, they can use this as grounds for refusing the claim.

It appears that the non-disclosure may not be related to the critical illness. Claims have been turned down for various reasons, including the case of a woman with breast cancer whose case was rejected because she hadn't listed treatment for depression on the original proposal form.

The rejection rates are shown as follows:

Company % of rejected claims
Scottish Equitable Project 28%
Norwich Union 26%
Friends Provident 25%
Legal and General 22%
Bupa 21.5%
Skandia 21%
Prudential 20%
Standard Life 20%
Scottish Widows 18%
Scottish Provident 11%
Scottish Equitable Guardian 10%
Average 23.5%

Despite the insurers claim that these rejections are perfectly legal, the Law Commission appears to think differently. There has been a consultation document published recently and the Commission makes the statement “It is possible for an applicant to act reasonably and honestly and yet still fail to meet the duty of disclosure.” The conclusions of these consultations will be reported on as soon as they are available.

It is therefore extremely important that when applying for this very valuable form of insurance, you disclose all previous illnesses. It's probable that if you have to claim, then your medical records will be thoroughly examined and if the insurers consider you omitted medical information, they may “throw out” the request.

Compare companies for the best rates. Read the small print. Spend some considerable time in listing medical conditions. Relax – it may never happen.

Critical Illness Insurance. Concerns For Cautious Customers

The Financial Services Authority has recently carried out a review of the way in which information and advice is given to retail customers purchasing financial products. One of the products which they considered was the sale of Critical Illness Cover.

Critical Illness Cover is often taken out by people taking out a mortgage, usually as part of a term assurance policy. It may also be purchased as a stand-alone product. The policy will pay out a lump sum if the borrower becomes seriously ill with one of a list of specified illnesses, commonly cancer, heart conditions, stroke etc.; this will help with loss of earnings due to the illness and general life-style changes which may be the result of the illness.

Firms selling critical illness cover are required to comply with certain standards and although these are being met reasonably well, the survey showed that there could be some improvement in the way in which they could help the customer to gain a better understanding of the product.

The FSA have visited firms and employed mystery shoppers to look specifically at how compliancy is working out with regards to sales processes when selling critical illness cover.

Supervision visits were paid to 42 firms. Whilst in the main these were financial and mortgage advisers, they also included banks, building societies and insurers. The market research company, Research International, carried out 80 mystery shops to 51 firms in total, to report on what actually occurs.

Director of Retail Firms, Sarah Wilson, has said that whilst many of the findings were positive, a few problems had been identified. Initiatives have been launched in order to deal with them. The fair treatment of customers is of prime importance, especially with regard to making policy application forms and documents more easily understood. So far these changes seem to be helpful.

Critical illness cover is, however, complex and some of the problems cropped up in the context of the financial promotion of the schemes and general insurance documentation. Customers sometimes have difficulty in comprehending exactly what they are being sold. Therefore it is difficult for them to assess whether this is the correct cover for them, or whether a payment of income protection product would be more suitable.

The needs of the customer have to be taken into account and there should be a careful assessment of the type of protection which they need. However, where there were two or more types of policy, the cost was sometimes the only aspect taken into account when recommending the most suitable one. Other factors may have been left out of the equation, such as conditions covered or whether there were other products more suited to a particular client’s requirements.

Miss-selling is a risk, but most firms had taken reasonable measures to manage this. There were found to be good training programmes and risk based monitoring.

As is the case with prime mortgage payment products, customers have time to consider their options before they make the decision to purchase the cover.

The results of the survey offer some reassurance that the needs of the customer are being protected and any changes to be implemented can only offer change for the better.

Choosing Life Insurance

Take your time in taking decisions, chalk out which one is best suited for you and your family from the policies made available by different insurance companies. Look into your age, condition of health, income, health habits, marital status, number of children and lifestyle.

You must always keep in mind that if you don’t need it, avoid it. No need to insure. Ask yourself how much your family is depending on your salary. If your family can’t do without your earning, you really need life insurance, otherwise no need to worry. It is difficult to say for how much money should you insure. Yes, it depends on your family’s lifestyle and debts. Generally, people keep it at between five and ten times of your annual salary.

It is recommended that if you're under 40 and don't have a family history of life threatening illness, try Term Insurance. It offers death benefit but no cash value. Otherwise, always go for the Whole Life Insurance, as it offers both death benefit and cash value. However, it is much more expensive than the former. As Term Insurance safeguards the policyholder only for a specified time period, it is appropriate for military and young families. It is cheaper than other policy types, but it has no savings feature.

It is also necessary to calculate your total insurance needs by examining the needs at various stages of your surviving family, and purchase insurance to cover the gaps. Don’t forget to review your life insurance plan periodically. You need to be alert when your financial responsibilities undergo a significant change. Be open to talk about the insurance plan with your spouse and let he/she understand the gaps the current insurance are going to fill.

Some points are also needed to keep in mind while buying insurance. Make your check payable to the insurance company, but not to the agent. And don’t forget to get a receipt. Even if you have purchased a policy, have a think and rethink for around ten days. You can always ask for a cancellation and change for an appropriate one with full refund. In case an agent or company contacts you and wants you to cancel your current policy to buy a new one, always contact the original agent or company before making any decisions. And it is up to you whether you try for an expensive one or the cheaper one. But don’t forget to gather maximum information.

Big Changes On The Horizon For Critical Illness Insurance.

In recent years sales of critical illness insurance have flagged. The primary cause is the huge 70% increase in premiums experienced during recent years. For many, critical illness insurance has simply priced itself out of the market.

It's not that critical illness insurance is a bad idea. After all it pays out a lump sum if the policyholder is diagnosed with one of the many critical illnesses listed on the policy and the policyholder survives at least 28 days from diagnosis. (Note: some policies have a 14 day survival period.) Most policies have a huge list of insured illnesses although about 60% of claims are for cancer – not surprising, as 1 in every 3 people will develop cancer sometime in their lifetime. In fact when you look at the concept of Critical illness insurance you can easily make a case that everyone living on earned income should have a policy. It's designed to give you a pot of capital to live on if serious illness prevents you from working normally.

Premiums have increased dramatically because medical advances have meant that many illnesses that proved fatal in the past are becoming quicker to detect and easier to treat. Hence insurance companies have found themselves paying out earlier on claims and on illnesses which are not necessarily debilitating - which was the original purpose of critical illness insurance.

To give you a better idea of the sort of illnesses we're talking about, here's a typical list:

Alzheimer's Disease

Aorta Graft surgery

Bacterial Meningitis

Blindness

Brain Tumour

Cancer

CJD

Coma

Coronary Artery by-pass surgery

Coronary Artery Angioplasty

Deafness

Heart attack

Heart Valve replacement/repair

HIV/AIDS resulting from blood transfusion

Inability to perform your duties of occupation

Kidney failure

Leukaemia

Loss of limbs

Loss of speech

Major organ transplant

Motor Neuron diseases

Multiple Sclerosis

Occupational HIV/AIDS

Paralysis

Paraplegia

Parkinson's disease

Stroke

Third Degree burns

Any illness that results in Total and Permanent disability

Insurance companies have at last realised that they're not going to get anywhere marketing policies that people can't or won't afford, and where the companies can't afford to lower prices. So it now looks as if insurers such as Scottish Widows are considering a break through – splitting the cover so that the prospective policyholder can specify which illnesses he or she wants to insure against. It's a form of “menu pricing” – cover for each illness would have a price and you simply select which illnesses you want to insure against.

Whether such insurance proves popular will very much depend on the cost. For example, if cancer accounts for around 60% of current claims, you'd expect the premium for covering cancer alone to be about 40% cheaper than a full strength critical illness policy. We'll have to wait and see.

If you're interested to find out how much a standard critical illness policy would cost you, you'll find it cheapest on the Internet. The best sites to look out for are the independent discounting brokers who deal with all the big insurance providers. These brokers can search the whole market for you, come up with the cheapest insurer, and discount their price. Try to use a broker who'll also give you personal advice on the phone as some policies do vary in the scope of their cover.

Tell The Truth With Life And Critical Illness Insurance

Insurers treat the non-disclosure of information on an application form very seriously indeed, and it is the most common cause for the rejection of a life or critical illness insurance claim. This true story explains that the situation isn’t always black and white, and demonstrates the severity of the penalty. We have changed some details to protect the anonymity of the policyholder.

Ms W had to have an operation to eradicate cancerous lymph nodes from her groin, and immediately fell ill after surgery with an infection she picked up in hospital. Critically ill, she had already made a claim on her critical illness insurance, however she received some unexpected bad news. Her claim was rejected and she was not going to receive the £200,000 she was insured for. How did this happen? Read on so we can explain.

June 2001 – Ms W went to see her doctor about an area of flaky skin on her back, she assumed it was something like eczema. Her GP wanted a specialist to have a look, and made a referral to a dermatologist. Before the appointment arrived, the patch of flaky skin cleared up, so Ms W cancelled the appointment, thinking no more about it. She did not imagine that it was anything serious, and the GP had not given her the impression that there was anything to worry about.

August 2001 – a sales representative from Ms W’s life insurer, Standard Life, called for a routine sales visit. Ms W’s circumstances had changed and she now had a young family depending on her. The sales rep suggested taking out a critical illness insurance policy, and she readily agreed. Ms W took out £200,000 worth of critical illness insurance.

The sales representative talked Ms W through the application form, filling in the answers on her behalf. When they came to the section about any incidences of referral from a GP, Ms W was unsure what the question meant, and asked the sales representative for clarification. According to Ms W, the sales rep told her that she only needed to mention a referral if it related to a serious matter. Ms W didn’t think it was worth mentioning the GP referral for the flaky skin, since she thought it was probably just eczema. She didn’t mention it so it didn’t go on the form. Ms W signed the form after completion and she applied for the Standard Life policy believing that she had provided all the required information.

Ms W soon received notification that she was insured for £200,000 in case she developed a critical illness.

Two years later – Ms W learnt that she had skin cancer, and major surgery quickly followed to try and remove the cancer. Ms W naturally made a claim on her critical illness policy, for which she fully expected to receive a £200,000 payout.

Soon after, Ms W received the rejection letter from Standard Life – the claim was rejected on the grounds of “reckless non-disclosure”. As far as the insurer was concerned, Ms W had withheld information on the application form, and this had invalidated her claim.

As you no doubt have realised, Ms W should have mentioned the GP referral to a dermatologist – and her failure to mention it resulted in a severe penalty. How could she have made such a mistake?

Two major errors were made:

1. When Ms W was asked to give details of any referrals she asked the sales rep what kind of referrals they meant. She was advised that she only needed to mention referrals relating to serious conditions. This advice was incorrect. The question asked for details of “all occasions her GP had referred her for tests or treatments”. ALL OCCASIONS means ALL – whether they were thought to be serious or not. The insurance company needs to know absolutely everything they ask for on the application form, and Ms W unfortunately did not provide that, thanks to the sales rep’s advice.

2. The GP did not give Ms W any indication that the flaky skin could be something serious, a fact that the GP stood by later. Ms W did not realise that the skin condition could be anything other than eczema, and so when told that she only needed to give details of referrals relating to serious conditions, she truly believed that her dermatologist referral was not worth putting on the form. She made this decision based on advice given by the sales rep, and it was a genuine mistake on her part.

Taking the above story into account, we think that Standard Life should realise that Ms W made an honest mistake, and did not deliberately withhold any information. The sales rep did not give the right advice, and Ms W followed that bad advice in good faith. It wasn’t her fault, and Standard Life should relax the penalty in this particular case.

Make sure it doesn’t happen to you

Filling out a life or critical illness insurance application form has to be taken very seriously indeed. You must read every single question and answer each one providing all the necessary information and detail. Withholding information is not an option, don’t be tempted by the thought of cheaper premiums because on making a claim, you will be found out and the claim will be invalid. Don’t take that risk!

Hopefully, Standard Life will see that Ms W did not deliberately mislead them, and they will give her the payout she deserves.

People that do deliberately mislead the insurers do deserve what they will eventually get – nothing.

NB: Standard Life rejects 5%, Friends Provident rejects 15% and Legal & General rejects 16% of all critical illness claims because of policyholders withholding information (whether deliberately or not). The insurance industry realise that they need to do something to address the situation, and are currently developing new ways to get information from applicants, and to publicise the severe penalties for not providing full and accurate information.