Why disclosing complete information for an insurance policy is important

The importance of full disclosure at the start of an insurance policy can never be overstated. Similarly, updating any changes during the term of your policy with your insurer is equally important.

According to Annual report 2021 of the Ombudsman for long-term insurance, the Ombudsman received 64 customer complaints about life insurance claims that were denied for non-disclosure. Only 17% of these complaints were resolved wholly or partially in favor of the complainant, underscoring the need for policyholders and potential customers to disclose all relevant information. Full disclosure at the start of a policy provides peace of mind for customers who, when submitting a claim, expect a stress-free process when their payment is due.

Understand why claims are denied

One of the reasons claims are rejected is that sometimes there is a discrepancy between the information customers disclose during the underwriting process and what they provide at the claim stage. A typical example is clients who may have been diagnosed with a chronic condition such as diabetes. Failure to fully disclose this medical history may result in the rejection of the claim by an insurer. This is considered a material non-disclosure because it influences the type of coverage an insurer would have offered a customer at the time of the request.

Besides medical non-disclosures, there are also other areas where customers fail to disclose relevant information when purchasing policies. These include disclosing information related to finances, lifestyle, profession, dangerous hobbies, and even disclosing information related to the client’s insurance history.

Paying all valid claims is what drives us as an industry; therefore, claims repudiation is something that all insurers take very seriously. Insurers need to work with customers, potential customers and financial advisors ensure that everyone is informed of the importance of fully disclosing their situation when taking out a contract.

It is essential that insurers put systems in place that will minimize the frequency of non-disclosures. As a starting point, it’s important to improve the underwriting process so that teams can get relevant information from the customer, without being overly intrusive – underwriting is an intimate and somewhat daunting process to go through from the customer’s perspective . To that end, teams must be empowered to ask the right questions, while keeping the customer comfortable.

Get the most out of your insurer

Although it may seem intrusive, the subscription process is important. Whether dealing with a financial adviser or conducting a tele-interview directly with an insurer, it is crucial to honestly disclose all relevant information to avoid the possibility of claims being rejected in the future.

Here are a few tips :

  • To prepare: Subscription will require specific details regarding your medical history, family history (to determine hereditary conditions), financial and employment information, and lifestyle habits (such as smoking or exercise routines). It is important that this information is readily available.
  • Be honest: It can be tempting to provide incorrect information – or withhold – information to try and get a lower premium. However, in the long term, this may result in your claim being denied or your policy coverage being withdrawn. Instead, be honest: even if you’re not sure whether the information is relevant, disclose it anyway. It’s also important to be honest about your insurance history, if any.
  • Ask: Your advisor can help you complete the application, which is helpful because advisors have many years of experience and knowledge and can make this part of the process easier for you. Ultimately, however, you must verify that everything disclosed on the application is true. It is also your responsibility to carefully read the terms and conditions quoted before signing. Make sure you understand the terminology and the benefits to which you are entitled, as well as the conditions relating to the benefits you are applying for.
  • Maintain contact: Insurance is a long journey. Be sure to keep your insurer informed of any changes in your occupation, residence or hazardous activities over the years – these are reportable changes for many insurers. You are not required to inform the insurer of a change in your state of health, unless it is something that you failed to disclose when taking out the policy. If you’re unsure what to advise, err on the side of caution and provide more information rather than less.

As a licensed life insurer regulated by the Financial Sector Conduct Authority (FSCA), an insurance company’s approach to non-disclosure should always be aligned with the position taken by the FSCA as well as the insurance mediator. All insurance companies therefore have a duty to ensure that all of their customers feel empowered and protected, trusting that the companies will treat them fairly.

Lisa Gibbon is Division Director for Integration at Liberty


This article does not constitute tax, legal, financial, regulatory, accounting, technical or other advice. The material was created for informational purposes only and contains no personal recommendations. Although every care has been taken in the preparation of this material, no member of Liberty makes any representation, warranty or commitment and accepts no responsibility for the accuracy or completeness of the information presented.

Liberty Group Ltd is a licensed life insurer and licensed financial services provider (no. 2409). Terms and conditions, risks and limitations apply.

Source link

Justin D. O'Neill