Why insurers don't pay claims
09 Jul 2018
Johannesburg, 16 May 2018 - Unfortunately many of us don't realise the true value of insurance until a claim event happens. When that day comes, we are all quick to ask if insurance was in place and understand that insurance is not simply a grudge purchase, it's an absolute necessity.
It is for this reason that it is vital you ensure that your insurance policy is valid and 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 which 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, which prevents you from earning your normal income.
Unfortunately, not all claims submitted to insurers are valid. When looking across all claims received by Liberty in 2017:
- 8.6% were for conditions that did not meet claims requirements and
- 1.6% of claims 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, this 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 full information at application, this could delay the underwriting process and lead to the cancelation of a specific benefit, a reduced payment at claim stage or even result in the entire policy being cancelled.
For this reason it is vitally important for you to carefully consider all the questions in 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 the application has been processed and the policy documents are issued, the insured client needs to thoroughly check the policy documents with particular attention being paid to the summary of disclosures. If any information needs to be amended, the client should contact their financial adviser or the insurer directly to address these inaccuracies.
As a client's life changes, so do their insurance needs. As a result of these changes, clients should take the time to regularly review their insurance cover to ensure it remains in line with their individual needs. Liberty encourages clients to familiarise themselves with the claims criteria and to consult with their Financial Advisers, to make sure they have the correct cover in place.