Risks of non-disclosure

Norwich Union is warning that too many people are risking their families’ financial security by not completing application forms fully and accurately. Failing to disclose all information can lead to a claim being rejected.

A study by Norwich Union, the UK’s largest insurer, identifies the five main conditions that people fail to disclosure when completing insurance application forms. They are:

  • Received treatment (including investigations, tests, scans, or x-rays) for multiple sclerosis, double vision, numbness or giddiness
  • Receiving current medical treatment or attention or awaiting a medical consultation, test or investigation or result
  • Smoking status, alcohol consumption or advised to reduce alcohol consumption
  • Have had episodes of depression
  • Has received any treatment in the previous 12 months

A common myth is that an insurer will automatically get full medical records when a policy is taken out. Insurers rely on applicants to share all the information they are asked for, as they are the only person who has all the required information. Insurers refer only to previous medical history at the time a claim is made, or if an application form highlights something they require more information about before underwriting the policy. To screen all applications up front would massively increase the cost of a policy and place an unacceptable burden on the National Health Service.

Tony Jupp, chief underwriter at Norwich Union, says: “The role of a life insurer is to help families if a breadwinner dies or suffers from a critical illness, but in order to do this we need applicants to help us help them. It is vital that people take a great deal of care and attention when completing these forms as the information they provide will form the basis of any life policy that they are offered. If applicants don’t share with their insurer information that is requested, it is likely that they will have invalidated their policy and if they make a claim, it might be turned down. We do request permission to access customers’ medical records on the application form, but this is to allow us to seek additional information if their responses point to something we require more information about before underwriting the policy.”

In the event of a claim being denied because of non-disclosure, industry practice is to return the paid premiums, setting both the individual and the company back in the position they began in before the contract was issued on an incorrect basis.

In 2005, Norwich Union declined 12% of critical illness claims as a result of non-disclosure, down from 13% in 2004.

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