Federal Insurance Program – Some Tips to Help You

Author: Michael Challiner
Source: articleage.com

Recent press coverage has again lambasted the insurance industry over critical illness insurance. The underlying problem is that a critical illness claim is not as straightforward as, for example, a claim under car or life insurance. With car insurance it’s patently clear whether or not you’ve had an accident – the damage is there to be seen and repaired. And with life insurance it’s going to be hard for the insurer to argue that you’re not dead!
By their very nature, critical illness claims are far more complicated. The insurers will need to satisfy itself that the claim is valid in three primary areas before it pays out: -
Is the medical diagnosis correct?
Is the diagnosed illness included in the schedule of insured critical illnesses listed within the policy documents?
Did the policyholder fully disclose their state of health and medical history on their original application form?
It’s clearly in the policyholder’s interest to check that the medical diagnosis is correct – so there’s rarely ever any conflict between the policyholder and the insurance company on that issue. It’s the other two areas which require validation where conflicts sometimes arise.
With constant research and development in the medical field there can sometimes be some illnesses where validation falls into a grey area – it can be argued that an illness is insured and it can be argued that it isn’t. Insurance companies are aware of these problems and they frequently revise the wording on policies in an attempt to clarify the extent of the cover and eliminate scope for dispute. Nevertheless, disputes are relatively common and sparks fly when the policyholder thinks he is insured but the insurer disagrees. This is illustrated by a case that comes before the Courts shortly. Mr Hawkins from Staffordshire is suing Scottish Provident under the terms of his ?400,000 critical illness policy. Basically, his medical advisers believe his illness is insured whereas Scottish Providents’ medical advisers disagree. If Mr Hawkins wins his case, the press will have a field day and the critical illness insurers will suffer further bad press it can ill afford.
Another summons, filed recently in the High Court, highlights the problem when an insurance company believes that the claimant mislead them on his or her original application form. Our understanding is that if an applicant misleads or leaves out relevant information, this amounts to obtaining insurance cover on false pretences. The High Court summons relates to Thomas Welch from north London who is suing Scottish Provident for ?206,800 which includes interest. The problem goes back to 2000 when, a few years after starting his critical illness policy, it was confirmed that Mr Welch had testicular cancer. The insurer refused the claim because of “non-disclosure saying that Mr Welch had not been honest about his smoking habit. He admits that he did smoke earlier in his life but is insistent that he had long since stopped when he applied for the insurance. As such, Mr Welch claims that he did honestly complete the application. We suppose that the case will centre upon whether Mr Welch accurately answered the questions about smoking. Most insurance companies define “a smoker” as a person who has smoked or otherwise taken nicotine products within the previous 5 years. If Mr Welch had smoked during those years, he would have had to answer “yes” to that sort of question and his insurance premium would have been as much as 65% more than he would have been charged as a non-smoker. We speculate that his lawyers may argue that either he did not smoke during the period in question or he omitted the smoking information by simple oversight and that his past smoking was not relevant to his testicular cancer. Interesting issues. We shall follow the case and let you know the outcome.
Mr Hawkins case illustrates the problems that can arise if insurance documents imprecisely define an illness or when the technical diagnosis of an illness leaves scope for medical experts to disagree. Both issues are entirely outside the policyholders control at a most difficult time for them and their families and we can well appreciate their anguish. The long-term answer must lie in improving the medical definitions within the policy. The probability is that this will lead to increasing the technical medical jargon which the man in the street would find difficult to understand – but that must be preferable compared to what Mr Hawkins is going through.
The other court case must stand as a clear reminder to all that insurance applications must always be 100% accurate and completed in good faith. We recognise that this may still leave room for dispute (and Mr Welch’s case may be a case in point), but if an applicant fails to accurately complete the forms, they are taking the significant risk that any subsequent claim will be rejected.
Rightly or wrongly, the press have a track record of giving the insurance industry a hard time, casting them as heartless big business. This reinforces the public’s impression that insurance companies are not to be trusted and especially it seems, with regard to critical illness insurance. This view is bolstered by the fact that around 20-25% of critical illness claims are rejected (the rejection rate does vary between insurers). This issue is something that insurance companies must get to grips with – it is bad for their clients and bad for the development of their business.
This is a crying shame. 1 in 6 women and 1 in 5 men will be diagnosed with a critical illness before their normal retirement age* and as such, critical illness insurance can greatly protect the finances of those unfortunate enough to be diagnosed.
(* Source: Munich Re.)

Author: Michael Challiner -
Source: articleage.com

Recent stories in the press have again lambasted the insurers over critical illness insurance. The core problem is that a critical illness claim is not as straightforward as, for example, a claim under life insurance. With life insurance it’s going to be hard for the insurance company to argue that you’re not dead!

By their very nature, critical illness claims are much more complicated. The insurer will need to satisfy itself that the claim is validated in three key areas before it meets the claim: -

Has the illness been correctly diagnosed?

Is the confirmed illness included in the schedule of insured critical illnesses covered by the policy?

Did the policyholder fully disclose their medical history and current state of health on their original application form?

On the first point, it’s obviously in the policyholder’s interest to verify the medical diagnosis – so there’s rarely ever any conflict between the insurance company and the policyholder on that issue. It’s the next two areas which the insurer needs to validate, where conflicts seem arise.

With constant development in the medical knowledge, from time to time there can be some situations where validation falls into a grey area ?- a policyholder will argue that their specific illness is insured whereas the insurer will argue that it isn’t. Insurance companies are aware of this problem and they often change the wording in their policies in an attempt to clarify the scope of the cover and eliminate areas for dispute. Nevertheless, disputes do happen all too frequently and sparks fly when a policyholder thinks his illness is covered but the insurer disagrees.

A case in point comes before the Courts shortly. Mr Hawkins from Staffordshire is suing Scottish Provident for ??400,000 under the terms of his critical illness policy. Basically, his medical advisers believe his illness is insured whereas the insurers’ medical advisers disagree. If the Court find in favour of Mr Hawkins the press will have a field day – and the critical illness insurers will suffer further bad press they can sorely afford.

Another summons, filed recently in the High Court and again involving Scottish Provident, highlights the problem when an insurer considers that a claimant mislead them on his or her original application form. Our understanding is that if an applicant omits relevant information or provides misleading information on their application from, this amounts to obtaining insurance on false pretences. This summons has been issued on behalf of Thomas Welch from London who is suing Scottish Provident for ??206,800. The issue goes back to 2000 when, a few years after first starting his critical illness policy, Mr Welch received confirmation that he was suffering from testicular cancer. The insurer refused the claim because of ?”non-disclosure alleging that Mr Welch had not been honest about his smoking habit. He does admit that he did smoke earlier in his life but is resolute in saying that he had long since given up when he applied for critical illness insurance. As such, Mr Welch believes that he did complete the application honestly.

We assume that the case will centre upon whether Mr Welch accurately answered the smoking questions on his application. Most insurers define ?”a smoker?” as someone who has smoked, or has otherwise used, nicotine products within the previous 5 years. (Some insurance companies adopt a 1year cut off.) If Mr Welch had indeed smoked during the specified years, he would have been obliged to disclose such information on the application and the insurer would have priced his insurance accordingly. In this context, it is relevant to note that smokers are charged as much as 65% more for critical illness over than non-smokers. We anticipate that Mr Welch’s lawyers will argue either that he did not smoke during the period in question or he omitted the smoking information by pure oversight and in any event, his past smoking is not irrelevant to his testicular cancer. Interesting issues and we’ll let you know the outcome.

Mr Hawkins case is fundamentally different. It illustrates the problems that can arise if policy documents imprecisely describe an illness or if the technical diagnosis of an illness provides the scope for medical professionals to disagree. Either way the issues are entirely outside the policyholders control at a distressing time for them and their families and we must appreciate their anguish. The long-term solution must lie in improving the medical definitions within the policy. It is probable that this will result in more medical jargon that the average man in the street will find difficult to understand – but perhaps that is preferable to what Mr Hawkins is going through.

Mr Welch’s court case must stand as a clear reminder to everybody that applications for insurance must always be totally accurate and completed in good faith. We recognise that in some cases this may still leave room for dispute (and Mr Welch’s case may be an example), but if an applicant fails to complete the forms accurately, they are taking the great risk and any claim they make could be rejected.

Rightly or wrongly, the newspapers have a history of giving the insurance companies a hard time, casting them as heartless big business. This serves to reinforce the public’s feeling that insurance companies are devious and not to be trusted – especially it seems, in respect of critical illness insurance. This view is reinforced by the fact that around 20-25% of critical illness claims are rejected (although this rejection rate does vary between insurers). This issue is something that insurers must come to grips with ?- it’s bad for clients and undermines confidence in insurance – and that must be bad for the development of the insurance industry.

In fact to put no finer point on it, it’s a tragedy. As many as 1 in 6 women and 1 in 5 men will be diagnosed with a critical illness before their normal retirement age*. As such, critical illness insurance is vastly important for the protection of family finances. The problems we have highlighted are obviously contributing to a situation where almost everybody needs critical illness insurance, but fewer and fewer of us are taking it up.

(* Source: Munich Re.)