The non-disclosure tango with TCF
- Posted by Roger Hendricks
- On 03/07/2017
- 0 Comments
Non-disclosure is a major issue in the insurance industry, and has been a major contributing factor towards the fraud problem that the industry faces.
But when does the whole non-disclosure debate cross the line when it comes to Treating Customers Fairly (TCF)? This was the theme of a recent complaint brought before the office of the Long-Term Ombudsman (Ombud).
Disclose your life events
The complainant’s policy commenced on 3 March 2013 with disability, income protection and temporary income protection cover. The complainant disclosed significant information to the insurer at application stage.
The complainant was asked if she received medical advice or participated in a rehabilitation program for alcohol and or drug abuse; the complainant answered no to this question.
She was also asked if she was taking or had taken any medication, drugs or sedatives for any reason other than a cold or flu; the complainant answered yes to this question and disclosed that she had used anti-depressants in 2007.
In May 2013, the complainant submitted a disability claim for Hypermobility Syndrome. The insurer declined the claim and repudiated the policy on the basis of the non-disclosure of the use of Antabuse, six months prior to the application of the policy.
Antabuse is described as medication for alcoholism and possible detoxification. The complainant admitted that she had used Antabuse for two weeks but stated that it had been prescribed by her doctor to help her lose weight. The complainant argued that she had considered the use of Antabuse irrelevant and did not think to mention it in her application.
Her medical practitioner confirmed that the Antabuse had been prescribed for off label use for weight loss. Another medical practitioner confirmed that the complainant was not an alcoholic and that her alcohol intake was acceptable. He further confirmed that he had never consulted with the complainant for alcohol abuse and that she had never been booked into a rehabilitation centre.
The traditional view
The insurer was of the view that the use of Antabuse was to prevent the complainant from using any alcohol. The Ombud asked a re-insurer for their opinion and they confirmed that they had never come across the use of Antabuse for weight loss.
A hearing was held in order to ascertain the reason for the complainant’s use of the Antabuse. The complainant, her medical practitioner and representatives of the insurer attended the hearing. At the hearing the complainant’s version regarding the use of Antabuse was accepted by all present.
Rethink the challenge
The question is, should the complainant have disclosed her use of Antabuse when she started taking the medication?
Provided any policyholder has relevant medical documentation to back their standpoint up, do they need to disclose that they are using medication that traditionally raises red flags with insurers when they are using medication for purposes outside of their traditional uses? This is a tricky subject.
The answer to this question is full disclosure, no matter what you think. One also cannot blame the insurer in the above complaint.
It also transpired during the complaint that there had been under-reporting of some of the complainant’s medical conditions at the date of inception of the policy. This was caused by the complainant’s financial adviser delaying the application process for more than a year, during which time the complainant’s medical condition had deteriorated.
Where is TCF in this instance? Firstly, one would assume that an adviser would send all of the documentation to the insurer at the soonest possible convenience so that cover is taken early on. However, if there is a delay, surely the adviser needs to sit down with the client again to check if their financial needs have changed because of medical conditions.
Bearing in mind the complicated nature of the case, the insurer offered a 50% benefit without admission of liability, which the complainant accepted.
The disclosure issue is a major hurdle when it comes to TCF and can cause significant headaches for insurers and advisers when brought before the Ombud in the case of a complaint. We are once again reminded of the importance to advise clients to disclose everything, no matter how relevant or irrelevant clients may think it is. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts firstname.lastname@example.org.