Most long-term care insurance (LTCI) policies pay a benefit if the customer can’t do a specific number of ‘activities of daily living’ (ADLs).
Examples of ADLs in LTCI policies are:
- mobility – moving from one room to another and getting in or out of a chair or bed
- washing – washing and maintaining personal cleanliness
- dressing – putting on and taking off clothing
- feeding – eating pre-prepared food and drink
- toileting – getting on and off the toilet
- continence – controlling bowel or bladder function
Insurers usually only pay if the customer can’t carry out a specified number of defined ADLs. The number and definitions of these ADLs will be in the insurance policy.
Reviewable premium and benefit levels
Insurers undertake a review of the premium and benefits, which means the policy their customer bought may change after the review.
Policies may include wording like ‘lifetime care’ and ‘funding for life’, which customers can find misleading. They may believe that once they’ve paid a single premium to the insurer, then nothing more will be due for the duration of the policy.
But because investment returns haven’t been as high as expected when many of these policies were sold, customers may had to:
- pay higher premiums to maintain the level of benefits they want
- accept lower benefits, which may not be enough to cover the care they need
Types of complaint we see
Complaints about claims
We see complaints from consumers who:
- consider themselves to have a disability and feel the insurer has turned down their claim unfairly
- have experienced a delay in their claim being handled by the insurer
Complaints about mis-selling
Consumers may complain to us that they were mis-sold a long-term care insurance policy because:
- they didn’t know their long-term care insurance (LTCI) policy was reviewable, or they’re not happy with the outcome of the review
- the cost of the premiums to maintain the cover after the review has become unaffordable
- the value of the cover is worthless due to reductions in benefits after a policy review
- the activities of daily living (ADLs) were not properly explained
Handling a complaint like this
If you don't reply within the time limits, or the customer disagrees with your response, they can bring their complaint to us. We'll check it's something we can deal with, and if it is, we'll investigate.
We'll expect you to be able to show us that you've investigated the complaint thoroughly.
Find out more about how to resolve a complaint.
What we look at
To help us consider a complaint fairly, we’ll ask you to provide some information. We’ll make our decision about what happened using evidence provided by you, your customer and any relevant third parties. In reaching a decision, we consider:
- the relevant law
- any regulations that applied at the time
- any industry codes of conduct in force at the time
- the terms and conditions of the policy
We’ll look at the available medical evidence to see whether we think your decision to decline a claim is fair and reasonable in the circumstances. We might decide the decision isn’t fair if we think you’ve only relied on evidence provided by your own in-house health assessor, rather than getting the opinion of the customer’s treating doctors.
As long as the policy terms are clear, we wouldn’t usually ask you to pay a claim unless the ADL definitions had been met as stated.
The Insurance Conduct of Business Sourcebook (ICOBS) places a responsibility on you to handle claims promptly and fairly. So, for example, even if the policy terms have an exclusion that’s relevant to the complaint, we’ll look at whether it’s fair and reasonable for you to rely on it in the individual circumstances.
We need to be satisfied that the insurer clearly told the customer that it would review the premiums and benefits. We’ll look at all of the documentation available from the point of sale including the:
- product brochures or promotional literature
- information recorded by the advisor in the fact find about the customer’s needs
- ‘reasons why’ letter from the advisor to the customer explaining the recommendation
- letter sent to the customer when the plan started, as well as the policy summary and policy document
Activities of daily living
We’ll want to know that the insurer clearly told the policyholder about the number and definitions of ADLs at the point of sale. We’ll look at:
- the information given to the customer, like product brochures, promotional literature, the ‘reasons why’ letter and policy summary
- whether the information clearly explained what ADLs are and which ADLs the customer would need to meet
If the ADLs weren’t clearly explained in the available documents, we might decide the insurer mis-sold the policy.
Putting things right
If we think you have made a mistake or treated a consumer unfairly, we'll ask you to put things right. Our general approach is that the customer should be put back in the position they would have been in if the problem hadn't happened.
The exact details of how we'll ask you to put things right will depend on the complaint, and how the customer lost out. In some cases, we may also ask you to compensate the customer for any distress or inconvenience they've experienced as a result of the problem.
The following examples give an idea of our approach.
If we decide there isn’t enough evidence to show conclusively one way or another if the policy terms have been met, we may ask you to arrange an independent medical examination. If we do this, we’re likely to tell you to decide the claim based on the conclusions of that medical report.
If a customer dies while you’re considering a claim
In this case, we’d look at the medical evidence to see if the deceased is likely to have qualified for benefit while they were alive. If so, we may ask you to pay the benefit to the deceased’s estate from the point at which we consider the claim could, or should, have been accepted, until the date of death.
If you’re dealing with a complaint about delays
Because of the nature of long-term care insurance, policyholders often claim towards the end of their lives. This means that unnecessary claim-handling delays can be very significant. The customer may be unable to continue to live independently, so decisions need to be made quickly about their future care. They, or their families, may have to pay for care while waiting for the insurance decision, which can add up very quickly.
If there’s evidence that the claim was delayed and this caused the customer distress or inconvenience, we may award compensation for this.
For insurance mis-sale complaints we’ll usually ask you to treat the policy as if it had never been sold. We’ll say you should:
- cancel the policy from the beginning and refund the premiums paid by the customer
- add simple interest at 8% a year from when each premium was paid until the settlement is paid
If the sale was made by an independent financial advisor or an insurance broker, it won’t be possible for them to cancel the policy and refund the premium. Instead, we’ll ask them to pay compensation of an equivalent amount.
This outcome may not be in the customer’s best interests if their physical condition has deteriorated to the extent that they may be able to claim benefit at some point in the future. In this situation, we’ll discuss all of the options with the customer before recommending the cover is cancelled.
Business Support Hub
If you want to talk informally about a complaint you’ve received, you can speak to our Business Support Hub. They can give general information on how the Financial Ombudsman Service might look at a particular complaint. They also offer guidance on our rules and how we work.
Find out how to contact our Business Support Hub.
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