Why insurers don’t pay life and health insurance claims
It’s important to provide all the relevant information when you’re applying for life or health insurance
Many of us do not realise the true value of insurance until an unforeseen event or accident happens. When that day comes, we are quick to ask if there was insurance in place. It is not a grudge purchase, but an absolute necessity.
It is therefore vital you ensure that your insurance policy is valid and that your claim will be paid as expected.
Henk Meintjes, head of risk product development at Liberty, says: “When you consider that Liberty paid out R4.46-billion in 2017, the need for long-term insurance cover becomes clear. This is money that our clients and their families need to manage their finances through these difficult times.”
Life and health insurance helps you and your family make lifestyle changes and pay monthly expenses following a death, critical illness or disability that prevents you from earning your normal income.
Unfortunately, not all claims submitted to insurers are valid. Across all claims received by Liberty in 2017:
- 8.6% were for conditions that did not meet claims requirements; and
- 1.6% were declined due to non-disclosure.
Meintjes explains non-disclosure: “When important medical, financial, lifestyle or occupational questions are answered incorrectly or where important information is omitted when cover is first bought, that is non-disclosure. It ranges from deliberate fraud to innocent omissions where certain information is simply forgotten.”
When insurers find out clients failed to answer questions on their application forms fully or honestly, they may reconstruct the underwriting decision. If the information was relevant to the underwriting of the policy, the cover may be declined or offered on different terms, including medical loadings, exclusions or limits on the sum assured. Unfortunately this new information is often only uncovered at claim stage and may result in the claim being repudiated.
Non-disclosure most often occurs in questions related to medical history such as psychological disorders but also in occupational and financial questions. When new policyholders fail to reveal the full information when applying, it could delay the underwriting process and lead to the cancellation of a specific benefit, a reduced payment at claim stage, or even the entire policy being cancelled.
For this reason it is important for you to consider carefully all the questions on your insurance policy application forms.
“The temptation to withhold sensitive information in order to reduce premiums is simply not worth it. If you are concerned about revealing private information to your financial adviser, consider tele-underwriting services instead,” says Meintjes.
Once your application has been processed and your policy documents issued, you must check the documents thoroughly, paying particular attention to the summary of disclosures. If any information needs to be amended, you should contact your financial adviser or the insurer directly to address these inaccuracies.
As your life changes, so do your insurance needs. Take the time to review your insurance cover regularly to ensure it remains in line with your needs.
Liberty encourages clients to familiarise themselves with the claims criteria and to consult their financial advisers to ensure they have the correct cover in place.
This article was paid for by Liberty.
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