Bulletin 07, 2006
Round up
Life insurance rate change this week from Bupa.
Wednesday March 8th is national no smoking day – smokers who have given up for 12 months plus can often get cheaper life assurance.
Defaqto says critical illness cover is suffering from a lack of trust.
Critical Illness Claims
While a ratio of 4 in 5 paid critical illness claims is good, the ratio that one in five is refused is poor. However, just because one company pays a higher proportion of critical illness claims than another doesn't necessarily make them a better/worse company.
When non-disclosure occurs, the majority occurs in the first few years of the policy life. If someone is told (off or on the record) that something may be wrong with them, or if they feel that something is wrong with them, some buy critical illness cover and fail to mention the reason that drove them to buy the policy. If such non-disclosure has taken place then a critical illness claim inside the first few months or years is likely. LifeSearch is often told of similar cases where the customer had already seen one or more specialists on a number of occasions, in addition to their GP, before they applied for critical illness cover - but hadn't mentioned the GP meeting, let alone the specialists. The result is often very difficult and sad to accept, but it is what the Ombudsman refers to as either 'deliberate' or 'reckless' non-disclosure and they will rule in the life insurance company’s favour.
If a salesman advised the customer not to disclose such information then LifeSearch believes the FOS would rule in the customer's favour every time - and rightly so. We've seen many borderline cases where the FOS has ruled in the consumer's favour and our general feeling is that if there is any doubt then the consumer’s view is the one that is upheld. So, when the FOS insists that the life insurance company was right, we should question whether or not we are seeing the full picture.
The boom in critical illness sales occurred in 2002 and by default a boom in sales will lead to an increase in paid claims and non-paid claims. A company that has written the majority of its critical illness business in recent years will, by default, have a higher proportion of non-paid claims for non-disclosure. But it doesn't mean that they are worse at paying genuine claims. This point was best highlighted recently by Scottish Equitable who published two sets of data, the new book (less than 3 years old) and the old book (more than 3 years old) and the difference is the number of critical illness claims paid is substantial, yet this is effectively the same company.
LifeSearch’s concern is that while 4 in 5 critical illness policies do pay out, consumers with older style policies, which have more favourable terms and conditions and cannot be replaced once cancelled, may be encouraged to cancel a critical illness policy that would've paid out later in life.
What we need is for consumers and advisers to better understand when these policies will not pay out, namely non-disclosure and not meeting the policy definition. This is why we called for the publication of paid and non-paid claim statistics. LifeSearch believes that if consumers understand the issues of non-disclosure and not meeting the definition when they are considering buying cover then more critical illness claims will be paid successfully, which is what we all want.
Hero of the week
Royal Liver
Who picked up 4 awards at the third LifeSearch Life Insurance and Protection Awards 2006. See below for the full list of winners.
LifeSearch Award Winners 2006
Best Life Insurance Service Provider
Legal & General
Most Improved Life Insurance Provider
Royal Liver
Best Critical Illness Provider
BUPA
Best Income Protection Provider
Liverpool Victoria
Best new Life Insurance Initiative
Royal Liver
Best Life Insurance Underwriting Team
Friends Provident
Best Individual Life Insurance Impact
Nick Erskine, Royal Liver
Best Life Insurance E-Commerce Provider
Friends Provident
Best Life Insurance Press Office
Mark Locke, Scottish Equitable
Best Overall Life Insurance Provider
Royal Liver
Back to Life Insurance Bulletins
