Insurance Claim Denied: When Your Insurance Doesn't Pay
I've received a lot of contact from clients over the last week regarding this episode of Fair Go.
For those without the time or motivation to watch the video, it tells the story of a guy called Shane.
Shane had insurance with Partners Life for years. He got diagnosed with a rare nerve disorder which left him unable to work.
He submitted a claim on his Income Protection Insurance and had his insurance claim denied was by Partners Life.
The insurer denied Shane's claim due to non-disclosure - when he took out his policy he didn't disclose information which would have affected the Insurance Contract he was offered by his insurer.
What is Non-Disclosure and how can it affect claims?
Non-disclosure is a MASSIVE issue at claim time.
When you apply for insurance, you have a 'Duty of Disclosure'.
In basic terms, you have to make the insurer aware of everything that may affect their decision to offer insurance to you. Legally, this duty extends to providing information even if it is not asked for on your insurance application form.
Your 'duty of disclosure' is very carefully laid out in every insurance application form.
The insurer will use this information to assess the risk of offering insurance to you during their 'underwriting' process.
So you have to tell them EVERYTHING - whether or not you think it's relevant doesn't matter, that's for the insurer to decide.
Back to Shane: What Did he fail to tell Partners Life when he applied for his insurance?
Shane didn't disclose 3 health conditions which, had he mentioned them on his application form, would have meant Partners Life refused to offer him insurance.
These conditions were found in his medical records when he tried to claim on his policy. Partners Life subsequently refused to pay his claim and voided his insurance policy.
The Fair Go story emphasises that Shane's non-disclosure of these conditions was unintentional. He did not feel that these conditions were relevant and he did not try to intentionally mislead the insurer. It paints a picture of a very long and confusing application form requiring lots of medical information.
There's a reason for this - all this info is needed by the insurer so that they can decide whether or not they will insure you and at what level. The questions about the the conditions Shane didn't disclose are right at the start of the medical questions; all the prompts were there and, in theory, should have signalled to Shane that information on these conditions was relevant (and even vital!) to his insurance application.
Shane took his case to the Ombudsman. They also upheld Partners Life's decision to refuse his claim and void his insurance policy.
I have a lot of empathy for Shane and others who have claims refused, it's a shit situation to have paid for a policy only to find out it's not going to pay out when you most need it.
In this case though, the blame does not lie with Partners Life. We work very closely with Partners Life and have always found their claims process exemplary.
I also know what it feels like to be told by an insurer that your health makes you uninsurable. It's confronting and can seem confusing when you're living your life with few issues.
It's really important to remember that insurers are looking at the risk of something happening in the future and so their decision is not necessarily based on you being fit and healthy now.
What can you do to prevent Non-Disclosure and your claim being refused?
Understanding the Insurance Application and Underwriting Processes:
As I mentioned above, the insurer uses the information you provide on your application form to make an assessment on what types of insurance they can offer to you and on what terms.
It is VITAL that you give them the full picture. Mention everything."
If you don't have full details or are uncertain on dates, say so! The insurer will pick these conditions up and get the relevant info from your medical records.
An insurer will only request your medical records if you have disclosed a condition on your application form which they need to investigate further.
But if they have my medical records, shouldn't they check that I've mentioned everything?
In a word, no.
Insurers aren't allowed to 'go fishing' through your medical records and pull out notes relating to conditions you haven't mentioned on your application.
Many GPs release full notes to insurers, but due to our privacy laws, the insurer can only access the info related to conditions you have mentioned.
The insurer is only allowed full access to your medical records in the event of a claim, so inevitably this is where non-disclosure is picked up.
There are campaigns under way to change this so that insurers must fully underwrite when you apply rather than when you claim.
Whether or not this will be successful remains to be seen.
On the surface, it seems like a great idea, but the additional costs involved may increase premiums to an unaffordable level for most of us.
Work With an Adviser
Yeah, I'm an adviser and I go on about this a lot.
It's not just blatant self-promotion though - filling in insurance applications is what we do. Every day. Over and over.
We know all the questions. We can make sure you understand your duty of disclosure. After all, no one wants to have their insurance claim denied.
We can make it faster, easier and far less confusing to get it right at the application stage.
Assess your medical records yourself!
Ok, so it's tedious, confronting and might take a bit of your time but... wouldn't you rather take the time now and avoiding paying for a policy you can't claim on?
Request your medical records from your GP and use them to complete your application form.
Again, working with an adviser will speed up the process.
I've done this myself.
I spent 2.5 hours on the phone with an underwriter making sure they had every detail about my extensive medical history. Boring? Yes. Confronting? Yes.
Worth it? Definitely - I know policies will stack up at claim time!
After reading this, you think you might have a Disclosure Issue?
Simple, tell your adviser or insurer straight away that you think you may have failed to disclose relevant information.
Yes, this may mean that you pay a higher premium, have certain medical conditions excluded or other changes to your policy.
All these things are better than spending 5+ years paying for a worthless policy, only to have your insurance claim denied.
NEED HELP WITH YOUR INSURANCE?
I may be able to help you with your non-disclosure. Book your appointment below!