Critical Illness not paying out

This article will explore the reasons Critical Illness policies do not payout along with some hints and tip around how to successfully appeal your claim.

A Critical Illness claiming being declined can come at a time when you already have enough on your plate worrying about ill health and finances. We have compiled this information to help people get to understand why they’ve had their claims rejected, how to assess the fairness of the decision and how to use an evidence-based approach to establish an appeal. It’s important to note that there are many different types of policies out there and everyone has different conditions that are at stages and have separate features. If you’re unsure about anything Resolute Claims offer free information and guidance around how to appeal claims on your own. Don’t hesitate to get in touch with us.

Why is my Critical Illness not paying out?

This is perhaps the most important question to ask. They’re two main reasons that a claim will not pay-out.

1. Non-disclosure of information that the insurance company believed should have been disclosed during the application process.
2. The policy terms have not been met. For example, perhaps the insurance company advised your Troponin levels were not high enough to meet the policy definitions (see our Critical Illness Heart Attack payout article for more information on this)

The first point relating to non-disclosure is basically the insurance company stating they don’t believe someone answered the questions on the application correctly. The non-disclosure can be classed at one of three levels.

Innocent, this means it was reasonable for you not to provide the information. For example, a minor childhood illness, an ambiguous question or something you could not have reasonably known about.

Careless, where you were careless in not disclosing the information. For example, you may have been referred for an investigation four years ago and the insurance company asked if you’ve had any investigations in the last five years, yet this wasn’t disclosed. This may be classed as careless as you may have misremembered how long ago the referral was.

Deliberate or reckless, means that you sought to deliberately mislead the insurance company or conceal information that you ought to have known was pertinent to the application. An example of this is that someone is currently being investigated for cancer and not disclosed this on their application. This may be classed as deliberate or reckless.

The type of non-disclosure has an impact on the remedial action the insurance company must take. For innocent, the claim must be paid in full. Careless means the insurance company may pay the claim in full, pay a partial claim or cancel the cover and reject the claim (depending on the type and nature of the non-disclosure. A deliberate and reckless non-disclosure will always normally lead to a claim being declined and policy being cancelled.

Examples of Innocent non-disclosure

Often, we see insurance providers deliberately avoid classing a non-disclosure as innocent. This happens because they can then class the non-disclosure as either careless or deliberate, meaning the claim amount can be reduced or rejected altogether.

An example we successfully won was of this customer:

A customer took out a Critical Illness policy and attempted to claim after being diagnosed with colorectal cancer. The insurance provider assessed the claim as they said that there was a careless non-disclosure, and had this been aware of this, they wouldn’t have provided cover.

The question they believed to be answered incorrectly was “have you experienced any unexplained weight loss, bleed or any moles that have changed shape or appearance in the last 12 months”. The client answered no.

Upon investigation the insurance company identified that the customer told his consultant he had some rectal bleeding that he thought was haemorrhoids. This started around two weeks before the policy was taken out and resolved about a month later. The insurance company thought the customer thought to have declared this “unexplained” bleeding in the question.

We argued that the question was ambiguous and afforded the person to use their own judgement to consider what was “unexplained”. If the insurance company did not intend this, they could have written the question differently. We won the case for the client on appeal to the Financial Ombudsman service and the customer received a full pay-out plus 8% interest.

To argue that a non-disclosure is innocent can take time and careful evidence-based arguments. If you think your non-disclosure is innocent, you can speak with one our consultants for free information and guidance around how to identify this and what your next steps are.

Examples of Careless non-disclosure

A careless non-disclosure is one where a reasonable or average customer should have disclosed information but did not due to carelessness. The ABI classify this as a “failure by the customer to exercise reasonable care. This includes anything from an understandable oversight, or an inadvertent mistake, to serious negligence.

This may be not disclosing a relevant GP consultation or a referral for investigations.

With Careless non-disclosures a proportional remedy needs to be applied. This depends on what the insurance company would have done had they been aware of the information. If the non-disclosure would have not changed the insurance companies’ decision or premium paid the claim would be paid in full.

If the disclosure would have resulted in an increased premium (the policy being rated) the claim will be paid proportionately. For example, when assessing claim, an insurer finds that he had incorrectly answered a question. They paid a premium of £50 a month for joint cover of £100,000. The insurer assesses the misrepresentation and If the correct information had been given, the insurer works out that the premium for joint cover of £100,000 would have been £75 a month.

As the claim is otherwise valid and a proportionate remedy is appropriate, the insurer reduces proportionately the amount to be paid on the claim. Using the formula set out in paragraph 8 of CIDRA 2012, the insurer pays out £66,666.67 (£50.00 / £75.00 x £100,000 = £66,666.67).

Examples of Deliberate or Reckless non-disclosure

This level of non-disclosure falls is only applied when it cannot be classed as innocent or careless. It cannot be applied when the non-disclosure would have resulted in a premium rating of less than 50%.

Typically, this level of non-disclosure is reserved for the most serious non-disclosures. In these circumstances, the customer knew, or must have known, that the representation they made in answer to a question was incorrect and knew, or must have known, that the information was relevant to the insurer. The burden of proof is on the insurance company to prove this is the case.

Not meeting the policy terms

Not meeting the policy terms is more common in Critical Illness or Total Permanent Disability Claims and rarely with Life Insurance claim.

In Critical Illness and TPD claims this tends to be either when a condition or illness has not reached a specific “severity”, progressed to a certain level (such as cancer not spread beyond the initial site) or is lacking certain clinical features/symptoms.

Insurance companies can be guilty of focusing on reasons not to pay a claim and can often disregard or under value evidence that contradicts their narrative.

At Resolute Claims we see lots of examples around this. Especially around people who have suffered from Heart Attacks, Cancer, MS, and strokes. For more information on these claims, please see our articles and case studies.

How to appeal a declined Critical Illness Claim

The first step is to identify exactly why an insurance claim has been rejected. Often insurance companies will attempt to advise that they wouldn’t have paid out if you never told them about a certain appointment/referral/investigation or condition. You need to find out why, what they would have expected you to disclose and why they wouldn’t have provided cover.

The best way to do this is via a DSAR (Data Subject Access Request) to the insurance provider. This will provide you with everything the insurance company hold on their system about you. This will include system notes about their reasoning.

Once you have this information you will have a better understanding of which points you want to address and obtaining evidence to support your claim.

When you appeal a decision it’s important that you focus on what you want to achieve, which is generally getting your claim paid. Often people will raise several points of poor customer service and long timeframes. Although these concerns are valid, they can often detract from the main points of getting a claim paid. We see insurance companies address points around the service provided at the expense of serious points around the claims handling process. This results in customers being offered £50-200 in compensation.

Note the points you would like to make and back this up with evidence from reliable and independent sources.

Keep your appeal clear and concise and don’t over complicate things. You will want to summarise why you think the claims been wrongly rejected and ask the insurance company to provide answers to any questions you have if they’re still unwilling to pay the claim.

Getting further help

If there’s anything you’d like to discuss or are worried about a Critical Illness policy not paying out, Resolute Claims offer free, impartial information and guidance. This means we can have a look over the paperwork you have and give you our honest opinion and what your chances are. We’ll guide you through your next steps and help you though the different stages of your journey.

Should you wish to use our comprehensive appeals service, we can offer this on a no win no fee basis.

For more information, call us on 0333 050 8792 (local rate number) or book an appointment.