Life and Critical Illness Insurance. Fully disclose your medical history when you apply.

You have been warned!

To help underline some issues, we want to tell you a true story - but we’ve hidden the policyholders’ name to preserve anonymity.

Mr P was fighting a secondary infection following surgery to remove cancerous lymph nodes when he received further bad news. The insurer for his critical insurance policy, which he took out two years earlier, was refusing to pay out the £180,000 he was expecting. To understand why and the issues involved you need to understand how events unfolded.

· In July 2001, Mr P visited his Doctor after discovering a patch of flaky skin on his back. Mr P thought it was eczema. During a brief consultation, his Doctor thought that it should be looked at by a dermatologist and recommended a referral. But soon afterwards the flaky skin healed and Mr P cancelled the appointment. Apparently the Doctor did not express any major concern and some years later admitted that Mr P was probably unaware of the urgency of the referral.

· Eight weeks later a representative from Standard Life made a routine visit to Mr P at his home. As Mr P had a young family, the representative reviewed Mr P’s insurance cover and suggested that he should also have £180,000 of Critical Illness Insurance. Mr P thought it sounded a good idea and agreed. So, he agreed to make an application there and then.

The representative brought out the form and went through it, writing down Mr P’s answers for him. When it came to the question asking Mr P to divulge all occasions his Doctor had recommended referrals for tests or treatments, Mr P asked the representative what Standard was looking for. Mr P alleges that the representative replied that Standard wanted appointments that related to serious conditions. Mr P did not believe that his referral for what he thought at the time was eczema, fell into that category - so he did not mention it. He then signed the form genuinely believing that he had done what Standard Life required.

Standard subsequently accepted his application and issued a Critical Illness Insurance policy.

· Two years later Mr P was diagnosed with skin cancer. Major surgery quickly followed to remove cancer from his groin. As his policy covered cancerous lymph nodes, Mr P then made what he thought was a valid claim.

· Standard subsequently rejected his claim on the basis of “reckless non-disclosure” – the insurers’ jargon for Mr P’s failure to disclose his referral to the dermatologist.

The Issues

It is quite clear that Mr P’s application should have included his referral to the dermatologist. So why didn’t he provide the information?

It seems that two aspects combined to create a situation: Standard Life’s representative interpreted the question on the application form to divulge “all occasions his Doctor had recommended referrals for tests or treatments” as only relating to serious conditions. That interpretation was wrong. The question asked for ALL OCCASIONS. ALL means ALL and is not asking the applicant make a judgement as to what is serious and what is not. The Representative was wrong.

Secondly, the Doctor clearly did not communicate the potential seriousness of Mr P’s referral to the dermatologist. If at the time the application was completed, Mr P did not know it was serious and the representative said the referral question related only to serious conditions, Mr P can hardly be blamed for not disclosing the information.

In our view, on the basis of the information provided to us, Mr P is blameless. The central error lies at the feet of Standard Life’s representative. He gave incorrect guidance on what the central question was asking for. Standard Life should pay out.

The vital lesson to be learnt

Always carefully read each question on an insurance application form - and answer the question ACCURATELY and FULLY. If you don’t, the insurance company can rightfully claim that you mislead them by omission. Don’t be tempted into thinking that by omitting some information, your premiums will be lower – well yes they might, but that’s false economy if it later results in your claim being rejected.

We hope Mr P will get his payout as circumstances beyond his control clearly mislead him. He acted honestly. He deserves his payout and our best wishes.

However, those applicants who deliberately withhold information from their insurer do not.

Postscript: Standard Life has reported that they refuse 5% of all Critical Illness claims due to non-disclosure. Legal & General is much tougher - they say they reject 16%.