Insurance company denied your
Life or critical illness claim?
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.
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.
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.
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.
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.
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.
Friends Life Ltd retroactively altered the terms of Mrs A’s life and critical illness policy and income protection plan for alleged non-disclosure after obtaining her medical records.
FOS decision: “I am satisfied that, for the reasons outlined by the adjudication, Friends Life was not entitled to rely on the information it obtained through Mrs A’s medical records to retrospectively alter the terms of her policies or decline her claim for PPB benefit under the life and critical illness policy.”
ReAssure Ltd (previously known as GAN Life & Pensions Plc) declined Mr A’s claim for permanent disability benefit based on their failure to appropriately define ‘unaided’ at the time the policy was taken out.
FOS decision: “Taking everything into account, I don’t think ReAssure’s decision to decline Mr A’s claim was fair.
“I also believe ReAssure’s approach to Mr A’s claim’s caused him unnecessary inconvenience and upset.
“Despite being directed regarding section 4b of the policy, it continued to rely on definitions of the word ‘unaided’ that (to all intents and purposes) didn’t exist at the start of Mr A’s cover or until years later.”
Scottish Widows Ltd refused the life assurance and critical illness policies held by Mr A’s wife, Mrs A. Rather than accept his claims Scottish widows voided the case on the grounds of misrepresentation.
FOS decision: “It followed that I did not believe Scottish Widows had reasonably concluded under relevant law and guidance that either Mrs A or Mr A had acted deliberately or recklessly when applying for Mrs A’s insurance policies. I set our how I intended to uphold the claims and ask Scottish Widows to pay proportionate remedies for both life insurance payments.”
You can of course appeal against the decision of your insurance provider and go to the FOS yourself to argue your case, however, you may find that this is a time-consuming and difficult approach.
If you choose to use CEL Solicitors, we will use our vast experience in representing clients and communicating with the Financial Ombudsman Service to appeal your case against your insurance provider and secure for you the compensation that you deserve. If we think you have a claim, we will gather further evidence to support your case. This might include medical records, policy documents, correspondence with the insurer, and any other relevant information.
We will review your insurance policy carefully, examine your terms and conditions, and weigh any exclusions that may apply to your case. We will look at the insurer’s reason for rejection and where we believe their investigation was excessive and irrelevant, we will argue so. In many cases, insurers have an appeal process for rejected claims. If available, we’ll follow the insurer’s appeal procedure while providing as much evidence as possible to support and strengthen your case.
If the appeal is unsuccessful, or the insurer doesn’t have an appeal process, we’ll take your case to the Financial Ombudsman, using our expert legal and technical knowledge, to get the best possible outcome for you.
We work on a no win, no fee basis, so you don’t have to pay anything upfront, and you won’t pay us a penny if for any reason you’re unsuccessful. We only deduct a success fee for our service when you are successful.