Times have never been better for taking out personal insurance, as recent improvements in the way insurers deal with critical illness claims may now be extended to income protection insurances as well.
Critical illness insurance provides a lump sum payout when a claimant has been struck by a severe condition, such as heart attack, stroke or cancer.
Income protection insurance provides a regular replacement income to those who are rendered unable to work due to disability.
The large insurance companies have since 2008 been publishing data on their critical illness claims, and showing in particular that they have softened their view of claims where the customer has accidentally or inadvertently supplied inaccurate information on an application form – an error known as ‘non-disclosure’.
Insurers have now generally accepted the suggestion that a critical illness claim should no longer be rejected, where the claimant can show that the non-disclosure was not deliberate.
While accidental non-disclosure may still preclude a full payout, insurers have agreed to pay customers a fair sum which reflects the risk and the premiums paid.
As a result of this, insurers such as Aviva have reduced the percentage of claims rejected due to non-disclosure to 2% in the first half of this year. This is a considerable improvement when compared to the situation in previous years. The Financial Services Authority noted that in 2006 a quarter of critical illness claims were rejected, and that half of those rejections were due to non-disclosure issues.
The increased transparency due to the publication of data is regarded as the driving force behind the increased acceptance of claims.
Income protection may follow suit
The Association of British Insurers has said it now intends to publish annual details of claims data for income protection insurance, in a move which is likely to result in similar improvements for claimants in that sector.
The Financial Ombudsman has stated that with income protection claims, most complaints relate to claims that were not rejected, but where the payout was less than expected.
