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The launch of a new investment product in the UK throws up an interesting idea that could get round the endless arguments and bad publicity that some life and critical illness insurers seem to evoke when turning down claims from dying customers, due to alleged failure to provide material information. One recent example that does the insurance world no favours is when a claim was allegedly turned down due to absence of doctor’s notes; despite evidence from the medical profession that doctors rarely commit to paper evidence of consultations where they have to give the bad news to a patient that they may be dying.

Life and critical illness insurance in the US pays out once the policy has passed its contestability period - usually 2 years and never more than 3. So even if the insured had committed fraud on their original application for insurance the life office must pay out once a policy has passed its contestability period. This is not the case in the UK where customers can be forced into lengthy battles up to and beyond their dying day, with UK life insurers who refuse the payout upon death based on material facts not established during the underwriting process. Should we not have a similar system here, where after a cut-off date, insurers have to pay out regardless and can no longer wriggle their way round or out of paying out on a policy that a customer has paid large sums of money for over many years.

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