Big drop in declined claims on Critical Illness
One of the largest Critical Illness insurers, Legal & General, recently announced a big drop in the number of claims on policies that it had refused to pay out. In fact the number of claims refused fell by almost a half and L&G paid out on 93% of its CI claims last year.
For years consumer groups have been attacking life insurance companies for refusing to pay out on such a high proportion of Critical Illness policies. In some cases a fifth of claims have been declined, leading to fury from policyholders and brickbats from the Consumers Association and others.
But in the last two years these problems have shrunk dramatically, for two main reasons. The insurers’ trade body got its members together and beat them up a bit. That resulted in an improvement in procedures. The forms weren’t clear enough and brokers weren’t diligent enough in ensuring that applicants answered all the questions properly. That resulted in a lot of rejected claims and disputes. Those problems have largely been sorted.
Equally important is a change in policy terms. Until a few years ago CI policies specified a precise list of illnesses that qualified for a payout. The problem was that advances in medical science led to new ‘dread diseases’ being defined that weren’t included in the original policy definitions, meaning that if you got one of these you weren’t covered. At the same time, improvements in treatment meant that what used to be a killer disease, like a heart attack, is now survived more often than not.
So most insurers have now changed the policy wording so that the list of diseases covered can change over time. This should further reduce the non-payment problem. But it does mean you need to understand clearly what a CI policy does and doesn’t cover.
