Truth pays when it comes to insurance claims
Insurers will always try to find a way to make paying the claim possible, even if there is nondisclosure, says an industry insider.
Failing to disclose important health information in life cover applications is a growing problem in SA and leads to life assurers turning down claims.
According to figures from the Association for Savings and Investment SA (Asisa), the SA life insurance industry repudiated a total of 5,026 claims — worth more than R1bn — in 2017, mostly because of nondisclosure or misrepresentation of material facts at the time of application.
It is distressing for consumers who diligently maintain their premiums to hear about incidences of life insurance companies not paying out claims, says Stacey Roper, certified financial planner at Alexander Forbes Financial Planning Consultants.
A recent example of nonpayment — which was later reversed after public outrage — was Momentum, which refused to pay out life cover of R2.4m to Durban widow, Denise Ganas, in November following the murder of her husband in a hijacking incident. Momentum had rejected the claim because her husband failed to disclose that he had had a blood sugar test two weeks before he applied for the policy in 2014 — something the insurer regarded as key medical information.
After taking public criticism to heart, Momentum later announced that a “violent crimes benefit” would apply to all past, existing and future clients which was funded out of company profits rather than clients’ premiums and Ganas was paid R2.4m, while several other claims were also paid.
Brad Toerien, CEO of life insurer FMI, says it has seen nondisclosure claims rise from 2.4% in 2015 to nearly 8% in 2018 — giving many people the perception that insurers don’t want to pay claims.
FMI is part of Bidvest Life and offers individuals disability, critical illness and life cover.
But, he says, insurers will always try to find a way to make paying the claim possible, even if there is nondisclosure, and he says that Asisa’s figures back him up: in 2017, life insurers paid out 99.75% of the value of all claims made, making benefit payments of R469bn to beneficiaries and policyholders.
“Decisions to decline a claim have a real impact on people’s lives, so we try to make the best possible call for our customers with the information presented to us. But it’s critical for policy holders to understand that as an insurer we also have an obligation to all other policyholders, as nondisclosure and misrepresentation can have a dire impact on the entire industry’s premiums,” he says.
The application process is a delicate balance between making sure the customer doesn’t have to jump through too many hoops to get sufficient cover for their needs upfront, and making sure they provide the insurer with enough medial history so that they can, in turn, offer fair terms of the policy upfront, he adds.
Toerien attributes the rise in nondisclosure more to customers’ circumstances than an increase in dishonest behaviour.
Factors that may lead to nondisclosure and misrepresentation include:
- Stressful financial times and increasing illnesses means you have more information to remember and disclose when applying for life cover.
- Doctors being too quick to prescribe medications, which may lead to life companies noting the conditions as pre-existing conditions. Pre-existing conditions can lead to your life assurer excluding certain conditions or loading your contribution if they do cover the conditions.
- Filling out applications in a hurry. Customers are time-pressed and forget to really consider their health history.
- Applying without the assistance of a financial adviser to check your application and ensure that you have answered all questions accurately.
Five ways to ensure your claims will be paid
• Know what you are buying
In the first instance, Toerien says, take the time to understand the policy and cover you select.
Roper advises to insist on a quotation before signing up for any life cover policy and make sure that you read the fine print carefully.
Things to look out for include the following: does the cover provide for payment for death resulting from natural and unnatural causes (accidents) or does it only provide for accidental death cover? Check the quotation for accuracy regarding your date of birth, smoker status, highest education level, job description, percentage of time spent doing manual work, administrative work and travelling for work-related purposes, she adds.
• Make full disclosure
Roper and Toerien both stress that making full disclosure to your insurer prior to inception of the policy is key. Disclosure of this information upfront means that the insurer can assess your overall risk profile and set out the terms and conditions on which they are willing to provide your cover upfront so there are no surprises later, Roper says.
Be wary of insurers who offer you cover without you having to undergo underwriting, Roper warns. Underwriting involves an assessment of your current health and lifestyle through a series of medical and nonmedical tests and questionnaires so that the insurer can assess your risk profile and insurability.
Some insurers will provide you with life cover with minimal or no underwriting at all but do the underwriting at claims stage, which creates uncertainty whether your claim will be paid or not.
• Details are important
Rather give too much information than too little. If you’re seeing a doctor, say so. If you’re not sure about the type of medication you’re on, check with your doctor or medical scheme for specific details of a condition or medication, Toerien says.
Roper says provide full information about any previous or pre-existing health conditions, no matter how insignificant it may seem, correct information regarding your lifestyle, including how much alcohol you drink per week, and disclose hazardous hobbies such as sky diving, paragliding or scuba diving.
It is also important to disclose if you intend travelling outside the borders of SA and how frequently and any hazards or dangers you may face within your normal duties of performing your current occupation.
• Stay updated
If you change your occupation, smoker status, hobbies and visit countries for leisure or business that are different to what you disclosed in your application, the onus is on you to inform the insurer of the changes, Roper stresses.
Toerien adds that you should ensure that your cover remains up to date, for example, if you have an income protection policy, be sure to adjust it in line with your salary, he says.
• Pay your premiums
Make sure that you have sufficient funds to cover the premium on your life policy when it is due. If a policy falls into arrears the insurer has no obligation to process a claim on that policy in event of a claim, Roper concludes.