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On 2nd December Jill Insley wrote an article ( http://t.co/1Cx2wAzR ) in The Observer about Nic Hughes whose critical illness claim has been turned down by Friends Life. A campaign has started to get Friends Life to overturn their decision and backed by @stephenfry on twitter the campaign is set to gain momentum.
We have decided to support the campaign and we want to explain our reasons why.
As we have previously expressed, we have had concerns for some time that the way that life insurance companies currently work may be leaving some customers exposed to the danger of a claim being turned down. When it comes to critical illness and life insurance there can be nothing worse than thinking you have done the right thing and protected your family with personal insurance cover only to find out when its too late that the insurance company has thrown out the claim due to ‘non disclosure’.
We accept that there are some occasions where due to deliberate non disclosure an insurance company will be quite within their rights to decline a claim.
However we believe there currently exists a grey area where it is much less clear that a customer has deliberately non disclosed. Misunderstandings concerning disclosure can and do arise and in the case of Nic Hughes it looks as though this might have been part of the problem.
We believe that the current underwriting practices used by most life insurance companies are adding to this problem. This is because most life companies often deliberately make the decision not to write for further medical information from the client’s GP at the application stage, even though the client might have disclosed one or more medical conditions on the application form. For medical disclosures such as heart disease and cancer, life insurance companies will nearly always prefer to write out to the client’s GP for further medical information. But there are many potentially ‘less serious’ conditions where the insurance company may decide not to bother with this stage of the process and to offer acceptance terms straight away. In fact life insurance companies adopt this approach for the majority of applications.
The problem is that where there is no independent medical verification there can be an increased risk of misunderstanding and therefore of a claim being declined, which is potentially catastrophic for the policy holder.
Life insurance companies argue that if they were to write out for medical evidence in a greater number of cases that this would add to their costs and that it would delay customers obtaining cover. They say that customers want cover quickly and that if they can’t get it quickly they will be put off taking out insurance.
We disagree strongly and so do most of our clients. We think that the argument that the ‘client needs a fast turnaround’ is a smoke screen and that there may be other motivating factors.
Here @MoneysworthUK our clients tell us that the most important thing for them is to know that their cover is valid. Getting the job done right is much more important than getting a quick fix. In the main they positively welcome a GP report as part of the underwriting process, because it makes them feel safer that they haven’t accidentally left something out. That’s probably not surprising when you consider that the majority of our clients already have an existing health condition such as diabetes, heart disease, mental health etc.
In the case of Nic Hughes, had the life insurance company written out to the client’s GP for a report before making their underwriting decision then the current situation could have been avoided. If they had declined or postponed cover then Nic could have explored other avenues to see if other options were available. Instead of which the insurance company seems to have taken the easy route which has turned out to be easy for them but very difficult for Nic and for his family.
In Nic’s case we think Friends Life should settle the claim. If you would like to sign the petition here is the link https://t.co/7KlFyuOL
Furthermore we think that Nic’s case illustrates the need for a reassessment of underwriting procedures across all life insurance companies. One possible way of dealing with this issue would be to make insurance companies fully liable for claims arising after a limited initial period – that would change the way life insurance companies approached their underwriting processes as they would not be able to rely on non disclosure at the claim stage. But it would leave customers knowing where they stand.
In the meantime until life insurance companies change their ways we think that ‘grey’ cases should be settled in favour of the applicants.
I said recently that more needs to be done to address the number of critical illness claims that are being rejected.
I was commenting following the publication of Scottish Provident’s latest claims stats. But in the interests of balance I should say that I didn’t mean to imply that Scottish Provident (at 7%) stood out from the crowd.
Scottish Widows do – at 13%!
Thats the figure for 2011 according a recent article by John Fitzsimons called Make A Successful Claim On Your Critical Illness Insurance‘. Apparently that figure represents as 30% increase on the percentage of claims rejected by Scottish Widows the previous year!
This figure should cause everyone concern and definately requires further investigation. Don’t forget that what we are talking about here is a bankassurance critical illness plan. This means that for millions of customers of the banking group a Scottish Widows critical illness plan will effectively have been the only choice offered to them.
If you have a Scottish Widows critical illness plan maybe its time to start asking some questions.
Yes, you do have choices about how you apply for life insurance and if you have diabetes making the wrong ones could cost you.
So here are the tips
1) Fully Disclose All Medical Information – cutting corners or forgetting to mention medical information risks making your cover invalid, but if you fully disclose all information you will have peace of mind knowing that the cover is valid.
2) Applying Direct To A Life Insurance Company Has Downsides – There is nothing wrong in applying direct its just that in doing so there’s a very good chance that you will end up paying more than you need to because there’s will be a good chance that another life insurance company would have charged a cheaper premium. In fact if you already applied direct to a life company and have an existing policy you should still read the tips below and consider getting a second opinion. It wont cost you anything but could save you lots.
3) Research Is Important – Good research will pay dividends and can save you a small fortune. Unfortunately its not easy to do this yourself.
4) Use An Expert – Some companies specialise in offering a service for people with pre existing health conditions such as diabetes, providing a more expert service to help find you best deal www.moneysworth.co.uk are one such company who individually research every single case and provide this service on a non fee basis so they are able to provide you with an indication of likely premium before you apply. An expert will also be able to provide you with information about what other associated types of insurance cover might be available, such as critical illness or income protection.
5) Most Advisers Do Not Specialise In Diabetes – If they dont really specialise its unlikely that they will be able to perform the research to the same standard as a real specialist.
6) How to Spot A Non Specialist – There are a number of ways. 1) Check the website -if the company is genuinely offering a specialist service this should be clear visible on the webite. 2) When speaking on the phone are they asking you the right kinds of questions about your diabetes, do they sound like they are dealing in this day in day out? 3) Sometimes companies pretend to be expert, they tend to rush to the application stage before doing any research – If they quote a preium straight away its probably not a good sign. If in doubt a good questions to ask is what percentage of their clients have diabetes.
7) Think About The Future As Well As The Present – If you develop further complications or additional health conditions in the future you may find it more difficult to obtain cover in the future. As a diabetic if you develop cardio vascular disease in the future, as things currently stand in the market, you will not be able to obtain new life insurance from any mainstream insurer.
8) Guaranteed Premium Rates Are Best – This means that the premiums cannot be increased in the future so you know where you stand so make sure that your premiums are not reviewable.
9) Remember That Once Your Policy Starts Your Insurance Is Guaranteed – Once your policy begins future health changes will not effect your cover or your premiums, which means you no longer have to worry about what the future may bring.
10) Prices for New Policies Will Go Up At The End Of The Year – This is true, especially so for females. If you have diabetes the process time from start to finish for life insurnace normally takes weeks rather than days. You can avoid the price hike by getting your cover in place before the changes take place – that probably means getting on with things now
If you would like a quote or would like to speak to an expert visit www.moneysworth.co.uk or call us on 0845 430 5200
The latest Scottish Provident set of claims statistics make for some interesting reading – there are both positive and negative points.
The £43 million in claims paid in the first half of the year is not an insignificant sum and the total now stands at over £1 Billion in critical ilness payouts since 1996. Thats a huge sum of money which will have benefited alarge number of people in their hour of need and proves what a valuable social function life companies perform.
Reading the more detailed report information provides a valuable insight., for example the average period from start to claim is 9 years and the average age at claim is 49.
The critical illnesses producing the highest amount of claims are Cancer 60%, Heart Attack 16% and Stroke 6% and the report further breaks down the cancer claims showing the biggest claim areas as breast 34%, bowel/colon 11%. malignant melanoma and prostrate both at 7%.
But….. the report shows that 7% of claims were not paid and this remains a concern. The two reasons given are a) material non discloure at the point of application and b) not meeting plan definitions and the report provides some examples of each.
Non-Disclosure – There will always be a small number of applicants who deliberately withold relevant medical information and if they are intent upon doing so there then this is their responsibility alone and this is a point which should be acknowledged by those who are critical of the life insurance companies.
However we need to ask ourselves whether as an industry we are really doing all we can to try and avoid ‘non deliberate’ non disclosure. Furthermore we would do well to consider whether this is always a point of sale issue. It is a fair question to ask how much non disclosure might be resulting from the fast track underwriting process itself. Are we sure that the right messages are being sent out if we are asking only a limited number of questions or where we are asking questions which refer to certain health events only within the last five years?
Interestingly a significant percentage of clients with pre existing health conditions express to us their preference for an underwriting process which includes the obtaining of medical evidence from their GP. They feel that this might cover anything they accidentally failed to remember.
What really would be of value would be to see insurance companies publishing comparisons between the rates of non disclosure applying to cases underwritten 1) without and 2) with further medical evidence.
Not Meeting Claims Definitions – This remains a thorn in the side of the life industry and we need to consider whether there is not room for improvement in how this issue is being dealt with. What we have at the moment is a stand off between the life insurance industry who claim that they are comitted to paying all ‘valid’ claims and those who claim that the industry deliberately rejects some claims that should be ‘valid’.
But in a standoff not much progress is made.
What needs to happen is for both sides to sit down with each other and work together. The long term prospects for the sales of critical illness and other socially valuable protection policies would benefit considerably from involving the consumer in the design, decision making and marketing process. The same applies to a number of other issues currently affecting the life insurance industry (eg STIP, simplified products, activities of daily living, consumer education).
There is a fear among many consumers of non payment at claim. This fear is sufficient to stop some from buying and for some it provides a convenient excuse not to buy. But even among many of those who do buy there remains a nagging doubt that the insurance they have purchased will turn out to be ‘invalid’.
A great deal more needs to be done to research this problem.
……..and could you be paying less??
If you have a significant health condition such as diabetes or heart disease and your application for life insurance is accepted, almost always you can expect to pay higher premiums because of your health condition. Insurance companies charge more to cover the higher risk of the policy resulting in a claim.
But have you ever stopped to consider how the extra amount the insurance company wants you to pay compares with the rest of the market? If you did and you looked into this further you might be very surprised at what you might find.
Consider this example – Sarah and Sue are twin sisters aged 40, both non smokers and each requires £180,000 term life insurance over a 25 year term. The only difference between Sarah and Sue if that Sarah has no significant health conditions, whereas Sue has insulin controlled diabetes with average control.
Sarah is able to purchase the required cover from insurance company A at £15.34pm with insurance company B offering her the same cover at £15.73pm – or about 2.5% more than company A.
But for Sue its a different story. Due to her diabetes Company A’s premium increases to £28.08pm. But company B now want a whopping £48.81pm! – which is now over 73% more than company A, or an extra £6,200 over the whole term of the policy.
So why does the differential go from 2.5% to 73%?
The answer lies in the different underwriting decision that that the company A and company B make after looking at the medical information. Not all companies make the same premium pricing decisions. In fact each UK insurance company generally has well over a dozen different premium ratings bands from which to choose when deciding which one to put you into and the key thing is that they dont all choose the same banding!
The moral of the story is that if you have a significant health condition shopping around is even more important than normal and could save you a small fortune. Even if you have alreay purchased cover in recent year after being diagnosed with your condition it is worth doing some research to see if you can save yourself some money.
Finally if you find thought of doing the necessary daunting (which it certainly can be) why not get a specialist broker to have a look for you.
www.moneysworth.co.uk offer a no fee life insurance shopping service for people with health conditions. Its simple to use and Moneysworth do the research for you. You can also call with your enquiry on 0845 430 5200.
I have just read an article in todays Cover Magazine here http://tinyurl.com/7dlbkwe in which Zurich’s head of underwriting is quoted as stating that huge numbers of applications received contain ’embellishments’ of the truth about applicants’ health details.
Why would anyone wish to take out life insurance using information which if succesfully contended at claim stage by the life company might lead to the claim being disallowed? How pointless is that? In stead of (presumably) saving a bit on the premiums, non disclosure risks wasting every penny of the premiums.
Of course in such cases it won’t be the person who is insured who will ever know. It will just come as an extra horrible shock to those who are left. Messy!
As so many of our clients at Moneysworth have pre existing health conditions (including diabetes, heart conditions and other health conditions), it is common for life insurance companies to write to our client’s doctors for medical information before making a final decision. Though on the face of things this might be seen to cause a degree of anxiety during the waiting period, the reality is that at the end of the process clients can feel extra peace of mind, knowing that the insurance company holds a report from their doctor.
In fact in many cases clients say to us that they would prefer the life company to write to their GP so that they can feel safe knowing that medical information HAS been disclosed!
And of course by using Moneysworth our clients know that we have properly researched the market to find the best solution for them individually. Which is important when you consider that different insurance companies charge widely different prices for people with the same health conditions.
So if you have a health condition and want to apply for life insurance make sure that you fully disclose your health information and if possible use the services of a life assurance broker who really does specialise in helping people with pre existing health conditions. That way you will know that you are fully covered and at a good price.
