Paul Fisher Insurance Services LLC

Withholding information is the single most common cause of a life or critical illness insurance claim being rejected by the insurer. We have a true story to tell you that will effectively highlight this issue, but to preserve the identity of the policyholder, we have changed the name and a few other details.

Mrs C had surgery to remove cancerous lymph nodes from her groin; while recovering from the operation, she fell ill with a secondary infection. At this difficult time, she received some extra bad news. Her claim under her critical illness insurance policy had been rejected, and she could not expect to receive the $200,000 payout. To understand why her claim was rejected, we need to look at the background to these events.

In June 2001, Mrs C discovered a patch of flaky skin on her back, and she went to the doctor thinking it was eczema. Her GP wasn’t sure and referred her to a specialist dermatologist for an expert opinion. However, Mrs C cancelled the appointment with the dermatologist because the flaky skin cleared up before the date of the appointment. Mrs C thought no more about it, especially as the GP did not communicate any particular urgency to her about the matter.

In August 2001, nine weeks after the GP appointment, Mrs C received a routine sales visit from her life insurance company, Standard Life. The sales representative reviewed her situation due to the fact she now had a young family, and recommended she purchase a $200,000 Critical Illness policy. Mrs C signed up to the new policy without hesitation.

The sales representative went through the application form with Mrs C, filling in the answers for her as they progressed through the questions. When asked to provide details of incidences when she had been referred to a specialist for tests or treatments, Mrs C asked the sales representative what Standard Life meant by that. Mrs C alleges that the representative stated that only referrals relating to serious conditions needed to be mentioned. Since Mrs C’s referral related to what she thought was eczema, she didn’t believe it to be a serious condition, so she did not mention it and it did not go on the form. They completed the form together and Mrs C signed the form believing that she had provided all the information that Standard Life had asked for.

Several days later Mrs C’s application was successful and she was issued with a Critical Illness Insurance policy for $200,000.

Two years down the line, Mrs C was diagnosed with skin cancer. She had to undergo major surgery to try and remove the cancer. Mrs C made a claim on her critical illness insurance policy believing that she had a valid claim.

Mrs C’s claim was rejected, Standard Life cited reckless non-disclosure as the cause  the insurer’s way of saying that Mrs C purposely withheld information about her referral to a dermatologist.

How did this happen?

It is clear by now that Mrs C should have mentioned the fact that she had been referred to a dermatologist – so why didn’t she?

Two events brought about this unfortunate situation:

1. When Mrs C asked what kind of referrals needed to go on the form, the Standard Life sales representative told her that she only needed to mention serious conditions. This was completely wrong  the application form question stated all occasions her GP had referred her for tests or treatments. The key words here are ALL OCCASIONS. ALL means ALL and there is no flexibility for an applicant to consider if the referral is worth mentioning or not. The sales representative provided Mrs C with the wrong advice.

2. Mrs C was not made aware by the GP that the flaky skin was potentially a serious matter. The GP later admitted that this was the case. If Mrs C did not realize that the referral was a potentially serious matter, then surely she cannot be said to have been withholding information when completing the application form. Remember, the sales representative told her that only serious conditions need to be mentioned.

It is our opinion that Mrs C should not be held accountable for what was a genuine mistake. The Standard Life representative provided incorrect advice at a crucial moment, and Mrs C followed it. We think that Standard Life should take these events into account, and validate the claim.

How to avoid the same happening to you

When you are filling out a life or critical illness insurance application form, read each question very carefully and provide an accurate and full answer. Do not consider withholding any information, because if you fail to disclose something that later comes to light, you will be held accountable as withholding that information on purpose. You may think that withholding that information could result in lower premiums, but it’s not a risk worth taking.

We’ve got our fingers crossed that Standard Life will relent and pay out on Mrs C’s policy. She was unfortunate in receiving poor advice, and did not willfully mislead the insurer.

However, people that do withhold information on purpose can expect everything they get on making a claim  nothing .

NB : 5% of critical illness claims are rejected by Standard due to non-disclosure. They’re not the highest: Friends Provident rejects 15% of claims for the same reason, and Legal & General rejects 16%. The insurance industry is addressing this situation at the moment by improving the way they obtain the information from applicants, any by providing clear information about the penalties for non-disclosure.

via Life and Critical Illness Insurance – never withhold information as it will invalidate a claim..