The Law Commission's proposal to introduce a non-contestability period into protection policies will cause insurers to be more selective about which clients they put on their books, according to speakers at an RGA life insurance conference.
Jason Hurley, head of sales and marketing at RGA UK, believes 5% of the population are “liars” and the introduction of a non-contestability period, which would make insurers prove non-disclosure within three years of the policy being taken out in order to decline a claim, would cause insurers to be more “fussy” about who they give cover to.
He suggests some insurers may design simplified application forms which only allow a select group of people to take out cover and, as a result, the industry may move towards preferred life policies.
Hurley also suggests a non-contestability period could result in more underwriting, a requirement for policyholders to sign a non-disclosure warning, the introduction of MIB – a system in the US which checks whether consumers have been declined cover in the past – and lie detection software during the tele-underwriting process.
Matt Rann, group underwriting and claims manager at Aegon UK, points out insurers will still be able to decline claims after three years where the non-disclosure is fraudulent, but he warns insurers may be reluctant to accuse policyholders of fraud.
He says in the legal profession barristers are reluctant to accuse people of fraud unless it is a very clear-cut case because of the emotions surrounding it.
Greig Woodring, global president of RGA, says a non-contestability period of two years already exists in the US and the amount of fraud there is increasing.
He states: “There is the possibility of defending a claim if it is bad and it is beyond the contestability period, but the majority of states don’t allow this. After two years and one day insurers generally have to write a cheque.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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