Most of the time, an insurer won't pay out on a life or critical illness policy claim because the person didn't give enough information, especially medical information. We're going to tell you a true story to help you understand some things. To protect your privacy, we've changed the name of the policyholders and changed a few other details.
Mrs. A had surgery to remove lymph nodes in her groyne that were cancerous. After the surgery, she got another infection. Her insurance company wouldn't give her the GBP200,000 she was expecting because of a critical illness. To understand why and what was at stake, it helps to know how the events happened.
- After nine weeks, a salesperson from Standard Life went to Mrs. A's house as usual as part of their job. Since Mrs. A was now on her own with a young family, the agent looked at her life insurance and suggested she get a GBP200,000 Critical Illness policy as well. Mrs. A thought that was a great idea and agreed right then and there.
- In June 2001, Mrs. A went to her doctor because she had a flaky patch of skin on her back. Mrs. A was sure it was eczema. During a short visit, her doctor thought it should be looked at and suggested that she see a dermatologist. But soon after, Mrs. A's skin stopped being dry and flaky, and she stopped going to the dermatologist. Her doctor didn't seem too worried, and a few years later, he said that Mrs. AP probably didn't know how important the referral was.
The salesperson got out the form and went through it, question by question, writing down Mrs. A's answers for her. When the question asked Mrs. A to say how many times her doctor had told her to see a specialist for tests or treatments, she asked the salesperson what Standard wanted. Mrs. A says that the representative told her that Standard only needed information about appointments for serious health problems. Mrs. A didn't think her referral for what she thought was eczema fit in this group, so she didn't say anything about it. Then she honestly thought she had told Standard Life everything they needed to know and signed the form.
Standard later accepted her application and gave her the Critical Illness Insurance policy for GBP200,000.
- It was found that Mrs. A had skin cancer after two years. The cancer was quickly taken care of by a major surgery. Since Mrs. A's cancer was covered by her critical illness policy, she made what she thought was a valid claim.
Standard Life later denied her claim because Mrs. A didn't tell them about her cancelled dermatologist appointment, which the insurance company called "reckless non-disclosure."
What's Up?
Things that happened after Mrs. A's application showed that she should have been sent to the dermatologist. So why didn't she tell what she knew?
It looks like two things worked together to make the situation happen: The salesperson for Standard Life told Mrs. A that the application form's question about "all times her doctor sent her for tests or treatments" only applied to serious conditions. That was a completely wrong way to look at it. The question was about ALL CASES. These questions are carefully worded, and ALL means ALL. The applicant is not asked to decide for himself or herself whether the reasons for the referral were serious or not. The person in charge was obviously wrong.
Second, Mrs. A's doctor didn't seem to tell her how serious her flaky skin could be or why she needed to see a dermatologist. If Mrs. A didn't know that her condition could be serious when she filled out her insurance application and the representative told her that the referral question was only for serious conditions, she can't be blamed for not telling them.
We don't think Mrs. A is to blame, based on the information we've been given. The important mistake was made by the person from Standard Life. He gave the wrong answer to the question that was at the heart of the argument. We think Standard Life should give out money.
What needs to be learned
Always read each question on an insurance application form very carefully and answer it completely and correctly. Don't let yourself be tempted to tell half-truths. If you leave out something they ask for, the insurance company has a right to say you misled them by omission. Don't be tempted to leave out some information to get a lower premium. You might get a lower premium, but that won't save you money if your claim is turned down.
We hope Mrs. A will get her money back because she was misled by things she couldn't change. We think she did the right thing. She should get her money and all of our best wishes.
But applicants who intentionally don't tell their insurance company something or give them false information do not.
Postscript: According to reports, Standard Life turns down 5% of all Critical Illness claims because the person didn't tell them about the illness. Some other insurance companies have much higher numbers. For example, Legal & General turns down 16% of claims, and Friends Provident turns down 15%. The insurance industry is trying to fix this by changing how they ask for information from applicants and how they explain the consequences of not telling.
