Protection or rejection

Insurance is designed to protect us, but complicated policy definitions and exclusions in the small print mean it is not always as reliable as people think, warns Which?.

 

People who fail to tell their insurer about a past health problem - even something as minor as a visit to the doctor about a headache a couple of years earlier - could have their insurance claim turned down.

 

One in five critical illness insurance claims was rejected in 2005 for failure to disclose health issues or because the illness claimed for was not covered by the policy - but with complex medical definitions it can be almost impossible to know what is covered.

 

Which? found the following exclusion relating to cancers in one policy document:

 

All  tumours of the prostate, unless historically classified as having a Gleason score greater than 6 or having progressed to at least TSM classification T2NOMO.

 

Payment protection insurance should pay out when people are unable to work, but often excludes two main causes of absence from work - back pain and stress-related illnesses. It has a particularly poor record for successful claims. In 2005, the amount paid in claims was only 20 per cent of premiums paid. In 2005, the OFT found payment protection claims ratios (claims as a percentage of premiums paid by customers), at approximately 20 per cent. By comparison, claims ratios for motor insurance were around 82 per cent.

 

People buying travel insurance should also check the small print. As well as exclusions for existing health problems, there can be strict time limits on reporting lost or stolen items that can make it very difficult to claim successfully

 

The Financial Ombudsman Service says that in 2006 about one third of health-related insurance disputes related to non-disclosure of existing medical conditions.

 

Malcolm Coles, Editor, which.co.uk, says: ‘It is easy to assume that if you take out insurance you are protected if things go wrong, but check the small print carefully and make sure you understand what is and is not included before you buy; or you might find it is worthless.”