One in five people may be paying into critical illness insurance policies which are effectively invalid, says the Ombudsman.
Speaking on BBC Watchdog last night, chief ombudsman Walter Merricks said figures at the FOS suggest one in five, or one million, people may have CI policies which are invalid because the information they gave on their policy application does not tally with their medical records.
Merricks says: "Of the products we cover at the ombudsman service, critical illness continues to be one of the areas that causes us most concern. The majority of cases we see are when a claim has been turned down because the insurer says there has been non-disclosure on the part of the policyholder.
"There appears to be a real gap between the information consumers think they have been asked to provide and what the insurer expects the consumer to have disclosed."
The programme gave the example of Jamie Barton, a man who was diagnosed with testicular cancer in 2006 and who had taken out a CI policy six years previously with Standard Life.
The claim was rejected because Standard Life said he had not declared a test done as a child for a completely unconnected illness and he had not declared his father had a kidney condition, which he knew nothing about.
A spokesperson for Standard Life says: "It is our normal procedure to obtain up-to-date medical information for all critical illness claims we receive, and in this case, it was only when this procedure was followed that we became aware of Barton’s family medical history.
"Barton’s medical records show that there was a family history of kidney disease, which he was aware of, and therefore he should have disclosed it. If we had been in full knowledge of the facts at the time Barton applied for the policy we would have declined to offer him critical illness cover due to the family history of kidney disease."
Jason King, director at Torquil Clark Life Insurance, says the Barton case seems to involve inadvertent non-disclosure of an unrelated material fact, which is in line with the Association of British Insurers' (ABI) guidelines, but which he thinks should be changed.
He states: "It is not treating customers fairly and it is often these declined claims that hit the headlines and damage our industry. When will the ABI get around to doing something about this?"
Have your say: Peter Chesworth of Ethikos in Reading says:
"Whilst insurance is a contract of utmost good faith it cuts both ways. The insurance companies when undertaking their underwriting should obtain just the same information as they do at the time of a claim. It is certainly not treating customers fairly to use two different procedures/criteria at underwriting and at the point of claim.
"I feel that if policyholders have provided details of their doctor it is up to the insurance company at the time of underwriting to check up on all the same records it will do at claim time. Otherwise, the insurance company should tell the customer very clearly within the cancellation period that the policy has been underwritten on the basis that the claim may fail because the insurer either cannot be bothered or is too penny pinching to do their job correctly.
"This at least would give the client the opportunity to request his/her GP to check that the information supplied to the insurance company on the proposal was complete. If new information came to light perhaps the customer could then sue the GP for negligence. Now there’s a thought given their new pay scales!"
Have your say: an ABI spokesman says:
"We were surprised by Merricks' comments and are raising them with him. We hope that we can have a constructive dialogue with the FOS on critical illness insurance, which is a valuable product that protects millions of people. We must all work together to ensure that consumers know their obligations to disclose pre-existing medical conditions - ABI initiatives in this area are already beginning to have a positive effect for customers."
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 7034 2680 or email [email protected].IFAonline
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