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ombudsman news

issue 129

October 2015

complaints about life assurance and critical illness cover

When someone makes a claim on life assurance or critical illness cover, they’re either bereaved or seriously ill. These experiences are distressing enough in themselves - so it’s understandable that problems involving these types of insurance can be extremely upsetting for the people involved.

Critical illness cover can be taken out on its own - or it might be part of other insurance policies such as life or “term” assurance, mortgage endowment policies or “whole-of-life” policies. The complaints we see generally stem either from events around the time a policy was taken out or from how a claim has been dealt with later on. It may be that issues around the sales process come to light only after a claim is made and rejected.

For example, in turning down a claim, an insurer might say their customer didn’t tell them important information - either deliberately or through carelessness - with consequences for the claim in hand. This is known as “misrepresentation”.

Equally, we hear from people who feel important information - which the insurer has referred to when turning down a claim - wasn’t made clear when they took out their policy. Our approach to misrepresentation is published on our website.

Complaints about claims often centre on a disagreement about whether someone’s medical condition or disability fits the definition in their policy. We’re not the medical experts, so we won’t make medical assessments ourselves. But we’ll carefully weigh up the medical evidence we have, including the views of any professionals involved.

Where something’s gone wrong, putting things right generally involves telling the insurer to pay the claim. In some cases, we’ll say a proportionate settlement is fair - for example, if the insurer wasn’t given important information from the start, which would have resulted in a lower payment or higher premiums.

Of course, a business isn’t responsible for the upsetting events resulting in a claim. But we’ll consider whether compensation is due for any unnecessary delays or poor customer service during an already difficult time for their customer.

index of case studies

  • 129/1 - consumer complains that insurer won't pay claim because heart attack doesn't meet policy definition
  • 129/2 - consumer complains that insurer should have offered new policy terms after loss of limb wasn't covered
  • 129/3 - consumer complains that his retrospective claim for permanent disability has been turned down - even though he's now permanently disabled
  • 129/4 - consumer complains that unclear policy wording led to insurer unfairly rejecting claim
  • 129/5 - consumer complains that insurer unfairly rejected terminal illness claim because of "non-disclosure"
  • 129/6 - consumer complains that insurer has refused to pay out for a heart attack

129/1
consumer complains that insurer won't pay claim because heart attack doesn't meet policy definition

When Mr B had a heart attack, he gave up work. He’d taken out a critical illness policy with his mortgage - and with no other income to make his mortgage repayments, he contacted his insurer to make a claim.

But after investigating the claim, the insurer wouldn’t pay out - saying Mr B’s heart attack didn’t meet the policy definition.

Unhappy with the insurer’s decision, Mr B made a complaint. He said he thought he’d taken out a “critical illness” policy - and he’d been left critically ill by his heart attack.

When the insurer wouldn’t change their position, Mr B asked us to look into his complaint.

complaint not upheld

The insurer sent us a copy of the terms of Mr B’s policy, which showed it was designed to cover heart attacks “of specified severity”. This was defined, along with other factors, as causing cardiac enzymes to rise beyond a certain level.

The insurer’s definition was in line with guidelines set by the Association of British Insurers that apply to all critical illness policies.

Looking at the medical evidence the insurer had received from Mr B’s consultant, it was clear that Mr B’s cardiac enzymes had been significantly lower than the levels set out in the policy.

From their records, it also seemed the insurer had looked at other factors - for example, the results of an echocardiogram test Mr B’s consultant had carried out. This also suggested that the heart attack wasn’t “severe” as defined by the policy.

Mr B sent us a letter from his GP confirming that he’d had a heart attack. He said his GP had said the insurer’s enzyme test was highly sensitive.

When we asked the insurer about the test, they confirmed it was sensitive - because it allowed enzymes to be detected at lower levels. But this didn’t change the fact that the level recorded for Mr B was well below the limit set out clearly in the policy.

We were sorry to hear about Mr B’s poor health. But in light of everything we’d seen, we didn’t tell the insurer to pay the claim.

129/2
consumer complains that insurer should have offered new policy terms after loss of limb wasn't covered

Following an accident at work, Mr L had to have one of his legs amputated. He contacted his insurer to claim on his personal critical illness cover - but was told that his policy only covered the loss of two or more limbs.

Mr L complained. He said he’d looked online and had seen the insurer now offered policies that covered the loss of just one limb. He felt that they should have told him about these newer policies - and that, since they offered that particular cover for newer customers, they should pay his claim anyway.

When the insurer maintained that they wouldn’t pay out, Mr L asked us to overturn their decision.

complaint not upheld

We asked the insurer for a copy of Mr L’s policy documents. “Loss of limbs” was defined as “The permanent physical severing of two or more limbs from above the wrist or ankle”. So we could see that Mr L’s claim wasn’t covered - and that the policy wording was clear.

Mr L told us the insurer was just trying to get out of paying - and didn’t think it was fair they hadn’t told him he could have had different cover.

However, we explained that it wouldn’t be practical for insurers to tell all their customers each time new products became available. In fact, new cover could turn out to be more expensive. Or it could even mean someone losing valuable cover after being underwritten for the new product, because their health had got worse over time.

While we were sorry to hear about Mr L’s accident, we didn’t agree the insurer had acted unfairly.

129/3
consumer complains that his retrospective claim for permanent disability has been turned down - even though he's now permanently disabled

Mr R’s insurance cover for critical illness had expired more than two years previously. He contacted his insurer to make a retrospective claim for “total permanent disability” - saying he’d been permanently disabled by serious back pain during the time he was covered.

The insurer agreed to look into whether Mr R’s claim would have been successful. But after reviewing his medical records, they said that his disability hadn’t been permanent at that time - and rejected his retrospective claim.

Mr R complained about this decision. He told the insurer that he hadn’t worked since the time he was covered, and provided physical assessment reports from the Department for Work and Pensions to show this. But the insurer refused to change their mind, so Mr R contacted us.

complaint not upheld

The insurer sent us the information they’d gathered from Mr R’s medical records relating to the time he was covered by their policy. In particular, they pointed out that Mr R’s doctor had recommended surgery that apparently had an 80% chance of success.

A letter from Mr R’s doctor had encouraged Mr R to stay active, get back to “light duties”, and had recommended physiotherapy. There were also notes from a specialist consultant, saying that Mr R’s pain seemed to be lessening. From the records, it seemed that the option of surgery had still been available to Mr R at the time his cover expired.

So it seemed it had been possible that Mr R’s condition could improve throughout the time he had critical illness cover. And we didn’t think a DWP assessment report alone was enough to prove he’d been “permanently” disabled during that period. It showed Mr R had been eligible for certain benefits at a certain time - but health conditions can improve or worsen and benefit payments can change or stop.

We were very sorry to hear that Mr R’s health hadn’t improved. But we explained that, in light of everything we’d seen, we thought the insurer’s answer was fair.

129/4
consumer complains that unclear policy wording led to insurer unfairly rejecting claim

After Mr N began to develop pain in his hip and back, his health deteriorated quickly. He made a claim on his life and critical illness policy, which he understood would cover him if he became disabled.

Mr N’s insurer arranged for him to see a doctor, and also sent a physiotherapist to review his health. After reviewing both reports, the insurer said he didn’t meet the policy’s definition of “permanently and totally disabled”, so they wouldn’t pay the claim.

Mr N insisted his problems were having a serious impact on his daily life - and wouldn’t improve in the future. When the insurer wouldn’t change their position, he contacted us for help.

complaint upheld

We asked the insurer for a copy of Mr N’s policy. This listed seven daily activities, such as washing and household cleaning - and “totally and permanently disabled” was defined as being unable to perform four or more of these tasks unaided.

Looking at the insurer’s records about the claim, we could see the doctor and physiotherapist had disagreed about Mr N’s health. We told the insurer to get the view of another doctor and reassess Mr N’s claim. But Mr N was still unhappy and contacted us again.

We considered Mr N’s complaint about the insurer’s second decision. The second doctor said that for four of the activities listed by the policy, Mr N needed some aids to help him - like using a stool when he showered. She also said that Mr N’s symptoms were “very unlikely” to improve over time.

These conclusions broadly backed up the first doctor’s view of Mr N’s situation. But the insurer still didn’t agree Mr N was covered - because he went about his daily life “unaided” by anyone else.

However, we pointed out to the insurer that two experts had agreed Mr N couldn’t carry out four of the daily tasks “unaided”. The policy didn’t specify that “unaided” meant without another person’s help - rather than without the help of practical aids.

Given everything we’d seen, we told the insurer to pay Mr N’s claim - backdated to when it was first made and adding interest.

It was also clear that Mr N had been through a considerable amount of worry and stress as a result of the insurer wrongly delaying his claim. To reflect this, we told the insurer to pay him £350 compensation.

129/5
consumer complains that insurer unfairly rejected terminal illness claim because of "non-disclosure"

After Mrs J died from colon cancer, her husband, Mr J, made a claim on her life assurance policy.

However, the insurer turned down the claim. They said that they’d received evidence showing that Mrs J had been having tests on her colon around the time she’d applied for her policy. The insurer said that Mrs J had failed to disclose this important change in her health - and that if she had, they wouldn’t have covered her.

Mr J told the insurer that his wife had visited the doctor with symptoms of a colon condition she’d had in the past, which the insurer had known about. He argued that as his wife hadn’t known there was anything more serious going on, she couldn’t have been expected to tell the insurer about it.

When the insurer wouldn’t reconsider their decision, Mr J complained to us.

complaint upheld

The insurer sent us copies of all the letters and documents they’d sent to Mrs J before she renewed her policy. We could see Mrs J had been clearly reminded that she needed to keep the insurer up to date with any changes to her health - and that failing to do this could mean the insurer wouldn’t pay a claim.

The insurer also sent us the medical records they’d received from Mrs J’s GP and consultant. As the insurer had said, Mrs J had been in contact with her GP and consultant - around the time that she’d taken out her policy - with symptoms relating to her colon.

But we also saw that the symptoms were the same as those Mrs J had experienced a few years before. At that time, according to the records, Mrs J had been diagnosed with “an irregularity of the colon”. She’d been told that this wasn’t cause for concern and that she wouldn’t need any treatment for it - but that she should go back to her GP if the symptoms returned.

Mr J told us that this was why his wife hadn’t been worried when she’d noticed the symptoms again. Thinking it was just the same colon irregularity flaring up, she’d visited her GP, who’d arranged for some tests.

We acknowledged that the insurer had told Mrs J about the importance of notifying them of changes to her health. But given she’d had the same symptoms in the past, we could understand why she might not have thought there’d been any change.

In light of this, we didn’t think Mrs J had deliberately or carelessly withheld information when taking out her life assurance policy. In the circumstances, we told the insurer to pay the claim, adding 8% interest.

129/6
consumer complains that insurer has refused to pay out for a heart attack

Mr D collapsed and fell unconscious while out walking with his wife. He was rushed to hospital and was told by the doctors who treated him that he’d had a heart attack.

When he was well enough, Mr D tried to make a critical illness claim. The insurer accepted that there were signs of damage to Mr D’s heart - but believed this had happened unnoticed some time before, during a small “silent” heart attack. They turned down Mr D’s claim, saying he hadn’t had a heart attack in line with the definition set out in his policy.

Mr D complained, but his insurer refused to change their mind. He then spoke to a heart charity about the dispute - and they put him in touch with us.

complaint upheld

We asked the insurer for a copy of their policy documents. In these, the insurer had defined a heart attack as “the death of a portion of heart muscle as a result of inadequate blood supply”. And they’d set out the evidence that they’d look for, to confirm a heart attack had happened - “chest pain, new electrocardiograph (ECG) changes and elevation of cardiac enzymes”.

The insurer told us Mr D hadn’t reported any chest pains and that his ECG test results weren’t what they would have expected if he’d had a heart attack. They also said his raised cardiac enzyme levels were more likely to be down to his having been resuscitated than his having had a heart attack.

We then spoke to the cardiologist who’d been treating Mr D. She said that, understandably, chest pains aren’t usually reported in cases where someone - like Mr D - has fallen unconscious. And Mr D had had a relatively small heart attack, which wouldn’t necessarily result in significant ECG test changes.

The cardiologist also explained that resuscitation only causes small enzyme changes - and she believed that the cause was far more likely to be a heart attack. She told us that Mr D’s recovery since his fall indicated the damage to his heart had happened then, rather than “silently” beforehand.

We weighed up the medical opinions we’d heard - bearing in mind it’s for insurers to prove that policy exclusions apply, rather than for customers to prove that they don’t. An experienced specialist - who’d been personally treating Mr D - had explained to us the reasons why his test results were consistent with a heart attack. So on balance, we decided it was most likely this had happened.

We also pointed out to the insurer that even if Mr D had had a smaller or “silent” heart attack, their policy didn’t say these types of heart attack were excluded.

To put right their error, we told the insurer to pay Mr D’s claim, adding 8% interest.

ombudsman news

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.