Life and Critical Illness Insurance Appeal

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Life and Critical Illness Insurance Appeal

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Life and critical illness insurance are something that you hope to never need, but those who find themselves in the unfortunate position to claim should be able to do so without worrying that their provider will short-change or deny their request.

If an insurer refuses to honour a life or critical illness insurance pay-out it can be a devastating blow during an already distressing time. This is particularly devastating for those who have paid their monthly premiums for years under the belief they were covered, only to be accused of misrepresentation or non-disclosure.

We believe around £226m is not being paid out each year. If your claim has been unfairly denied you may be able to appeal against your insurance provider’s decision.

Misrepresentation and Non-disclosure

One of the most common reasons your insurer may refuse to pay-out – either by denying or offering only partial payment – is for misrepresentation or non-disclosure of your previous medical history.

Misrepresentation and non-disclosure is defined as the deliberate, reckless, or careless omission of information.

Broadly speaking, non-disclosure applies to the information you provide at the outset of your policy, while misrepresentation applies to any information given over the lifetime of the policy.

Many insurance firms are known to use aggressive and unfair criteria when assessing medical records from claimants. Some go as far as to look through several years’ worth of GP notes, citing anything from high blood pressure to irregular sleeping patterns as reasons to disqualify or reduce an insurance pay-out.

When a pay-out is rejected, policyholders are often encouraged to accept a partial settlement or a simple refund of their premiums as a “goodwill gesture”. This ultimately only saves the insurance provider money.

How Does Life Insurance Work?

In essence, life insurance is a contract between the insurance provider and the policyholder. The policyholder is expected to make regular payments to the provider and in exchange the provider agrees to pay a lump sum or an income to a beneficiary or estate of the policyholder upon death.

The most common types of life insurance are term assurance and whole of life plans.
Term life insurance covers the policyholder for a set number of years – typically until retirement – and is often needed when taking out a mortgage.
The average value of a term life claim is around £77,500.

Whole of life insurance covers the policyholder until death and allows the policyholder to build an inheritance or cover funeral costs.
The average value of a whole of life claim is around £3,500.

Life insurance is designed to give the peace of mind that a person’s loved ones will be protected financially in the event of their passing. This peace of mind is based on trust that the provider will fulfil their end of the agreement after their passing.

How Does Critical Illness Insurance Work?

Critical illness insurance is very similar to life insurance in that it is a contract between a provider and a policyholder, covering the holder in the event they are diagnosed with a life-changing health condition. These health conditions are typically long-term or terminal illnesses with cancer being the most common reason for claim, followed by heart attacks and strokes.
The average value of a critical illness claim is around £67,500.

Critical illness cover is designed to pay-out a sum of money to help the policyholder and their family cover living expenses and any mortgage/debt in the event that a serious condition develops.

Do Insurers Refuse to Pay-out?

In the UK the market for life and critical illness insurance is dominated by a hand full of firms, each with distinct differences in their pay-out rates. Vitality for example have a pay-out rate of 99.6%, while Aegon have a 95% pay-out rate.

According to statistics released by the Association of British Insurers (ABI) in 2023, 97.5% of all claims resulted in a pay-out. This figure, however, is elevated by “whole of life” policy claims which report a 99.99% pay-out rate. At the other end of the scale, only 84.4% of “income protection” claims and just 70.3% of “total permanent disability” claims resulted in a pay-out.

The ABI states that most declined claims are done so on the grounds of misrepresentation and non-disclosure. “In more than half of the declined claims, customers had not told their insurer key details about themselves or their circumstances when they took out the policy”.

Additionally, these figures do not account for claims which were offered with only a partial settlement or a refund of premiums, which serves to inflate figures in favour of the insurance industry.

Can you appeal against your insurer’s decision?

No, you do not have to accept the insurer’s decision and you can fight for your rights. Insurance providers are overseen by the Financial Conduct Authority (FCA) and complaints are handled by the Financial Ombudsman Service (FOS). You have the right to take your case to the FOS to appeal against your insurance provider and challenge the rejection or reduction of your claim if you believe they are being unfair.