As of 2023, life Insurance in the UK is a 65.3-billion-pound market. Life Insurance is often initiated for practical purposes, such as a mortgage. Of the UK population, 35% currently have a life insurance policy and recent studies show all but 3% of those with life insurance have coverage including the likes of, terminal illness, critical illness cover, joint life insurance, and over 50s life insurance.
The vast majority of those with life insurance bought this privately, often under the belief they would never have to make a claim. Those making a claim do so while in an incredibly vulnerable state, and many are served a devastating blow when their insurer refuses to honour their policy.
Sadly, insurance providers refuse to pay out an estimated £226 million each year. These individuals are left feeling hopeless, unaware that they can challenge their insurer when they feel their claim has been unfairly denied. Successful insurance appeals can see the full payout ordered payable to the claimant.
In what circumstances may I have a successful insurance appeal?
According to the Association of British Insurers (ABI) Code of Practice, individuals will have a valid claim where they have acted honestly and reasonably. In these circumstances, a reasonable person would have considered the information, subsequently scrutinised by the insurer, as not being relevant. In cases of innocent misrepresentation, the insurer is instructed to pay the claim in full.
Cases of innocent misrepresentation upheld by the Financial Ombudsman (FOS) can be seen below.
Terminal Illness Insurance Claim
In a recent FOS decision, a complaint had been brought on behalf of the late Mrs H by her husband against Aviva. Aviva declined Mr H’s claim of terminal illness and death under policies held by Mrs H. Aviva claimed their reason for doing so was due to Mrs H not disclosing symptoms she was experiencing at the time of her application.
The FOS reviewed this decision and decided Mr H’s complaint should be upheld against Aviva. FOS advised Mrs H’s symptoms were extremely specific and not relevant to the application questions. As such, Mrs H failed to provide information innocently. Her insurance appeal was successful and Aviva was instructed to pay the claim in full.
Critical Illness Insurance Claim
Mr. G and Miss. B took out a life and critical illness insurance policy with Prudential in 2003. Miss. B was diagnosed with multiple sclerosis in 2015 and claimed on the policy. Prudential denied this claim, advising Miss. B should have included her experience of pins and needles between 2001 – 2022. The insurer claimed had they been aware of this, the policy would have been refused.
The FOS reviewed this complaint and concluded the relevant application questions were not sufficiently clear or that Miss. B should have answered them differently. The FOS instructed Prudential to pay the claim in full, add 8% interest per year from the date it received Miss B’s medical records in 2015 to the date of payment, and provide £750 compensation.
Joint Life Insurance Claim
Mr and Mrs L took out joint life and critical illness insurance with Zurich in 2012. This included cover for total and permanent disability (TPD). Mrs. L’s health deteriorated and she attempted to claim the TPD benefit.
However, Zurich rejected this claim on the basis that information from her medical history had not been disclosed. For example, Mrs L had suffered from depression and anxiety for many years but did not disclose this on her initial application.
The FOS reviewed the complaint and concluded that as Mrs L did not disclose health issues she had experienced for a long time, this would not be classed as innocent misrepresentation. However, as they cannot know what was discussed with the broker or how the application questions were put to the policyholders, they decided it would not be reasonable to classify this as deliberate or reckless. The insurance appeal was successful and upheld, and Zurich was instructed to reinstate the policy.
The ABI Code of Conduct advises individuals may also have a valid claim where a misrepresentation arises from insufficient care. This includes anything from an oversight to an inadvertent mistake. In these instances, a proportionate remedy is applied.
Cases of careless misrepresentation upheld by the Financial Ombudsman (FOS) can be seen below.
Terminal Illness Cover
In 2008, Mr H arranged a level-term life insurance policy through his broker. It provided cover of £200,000 for a term of 15 years and included terminal illness benefits. Mr H fell ill and claimed the terminal illness benefit. Legal and General paid a reduced amount, claiming Mr H did not disclose important medical information. This information related to his family history and the causes of his parent’s death.
The FOS reviewed this complaint and concluded it is unlikely that Mr H knew the meaning of complex medical terminology. As such, he would not have known that his father’s cause of death was a type of stroke and would not have provided these details. It was concluded that this was a case of careless misrepresentation. Legal and General were instructed to pay the outstanding amount owed to Mr H.
Critical Illness Cover
Mr A took life and critical illness insurance with Legal and General in 2012. Mr A later became ill and attempted to claim on the policy. Legal and General rejected the claim on the basis Mr A had not disclosed the fact he was a smoker on the initial application. They suggested that had they known about this, the policy application would have been rejected.
The FOS reviewed this complaint and concluded that Mr A’s complaint should be upheld. They did not believe it was clear that Mr A deliberately failed to disclose that he smoked. They also concluded that even if this was disclosed, Legal and General still would have offered insurance. They advised Legal and General should reinstate policy on the smoker’s rates and reassess the claim as if there is no misrepresentation. FOS also instructed Legal and General to provide £500 compensation as a result of the successful insurance appeal.
Joint Life Insurance
Mr C and Ms D took out joint life insurance in 2007 via a Legal and General-appointed representative. Ms D underwent a telephone medical interview, where she disclosed to Legal and General that she had suffered from depression for 11 years. Her health deteriorated and she sadly passed away in late 2010 with her cause of death being suicide. Legal and General rejected Mr C’s claim after finding Ms D had attempted suicide in 1995 and 1998.
Mr C did not agree with this position and escalated the complaint to the FOS. The FOS upheld the complaint, advising Ms D was honest about her depression. However, she did not disclose referrals to a psychiatrist or hospital treatment for mental health issues. This was a case of careless misrepresentation and a proportionate remedy was applied.
Over 50s Insurance
Mr and Mrs T sought cover via a third-party advisor in April 2011 with Legal and General. Mr T was diagnosed with multiple sclerosis (MS) in May 2014. When making a claim, he informed Legal and General he had an episode of numbness in 2008 and subsequently had an MRI. He also advised his mother had been diagnosed with MS at a young age. Legal and General rejected his claim, concluding Mr T failed to disclose important information and cancelled their policy.
The FOS reviewed the complaint and upheld it in favour of Mr T. It concluded that this was a case of careless misrepresentation. They believed that Mr T did not intend to mislead the insurer, as he volunteered this information. As such the insurance appeal was successful and Legal and General were instructed to reinstate the policy.