Most times insurers are criticised for not paying claims. The truth is that the claims process is influenced by a lot of things - more so, by the information that clients give insurers at underwriting stage and beyond. That's why non-disclosure is pertinent, and should happen at the beginning of a discussion with the financial adviser and the client.
What is non-disclosure?
When medical, financial, lifestyle or occupational questions are answered incorrectly or when important information is omitted during underwriting, it is called non-disclosure.
If your financial adviser fills in the insurance application form out for you, the responsibility sits with the client to read through all documents carefully before signing.
Lisa Gibbon, Divisional Executive: Onboarding at Liberty comments: "Despite common misconceptions, the only time claims are not paid is when they are invalid. Claims are invalid if a customer does not meet the criteria required to claim, or has not fully disclosed important information such as medical, lifestyle, or financial particulars.
"Full disclosure includes updating underwriters about all illnesses at the time of underwriting, even if you do not think they are important."
What about dagga?
Given the negative stigma that cannabis users have been exposed to over the last few decades, it is understandable that South Africans are afraid to disclose cannabis use to their insurers. However, when you enter into an agreement with an insurer, it is a contract based on trust and your information is treated with the utmost confidentiality. It is therefore important to be honest about the use of cannabis as part of your full disclosure.
What is my role as a policyholder?
It's critical that policyholders fully understand non-disclosure and how to avoid it. The insurer relies, in good faith, on applicants to provide comprehensive and correct information, and this is in line with industry practice.
There are two essential requirements to ensure your claims are valid. First is to understand exactly what your policy covers and second is to avoid non-disclosure. According to the Association for Savings and Investment South Africa (ASISA), the majority of rejected death and disability claims in 2017 were for material disclosure and misrepresentation.
"Even if you think certain information is unnecessary, disclose it anyway," says Gibbon.
The role of an insurer
Insurers need to make the application process as easy as possible for the client. Elements like sending a nurse to the client for the relevant blood tests or providing tele-underwriting services are just some ways that they are making things a little easier.
During the claim stage, all claims undergo a verification process and if, during a claim investigation, it is discovered the policyholder disclosed incomplete, incorrect or misleading information, it can make the contract invalid.
A common misconception is if the non-disclosure does not relate directly to the cause of the claim, then the claim cannot be repudiated. It's important to understand that at the stage when a new policy is instituted; the insurer assesses the risk and bases the cover on the information provided by the applicant. If this information is incomplete or incorrect, the insurer does not have the opportunity to make an accurate assessment of the risk.
At claim stage the insurer will review all information disclosed; if it becomes clear that the insured benefit would not have been offered if full disclosure had been made, the insurer is entitled to repudiate the claim, whether the misrepresentation relates to the cause of the claim or not. Non-disclosure is a growing issue in the industry and Liberty's approach is one where it makes every effort to secure a positive outcome for the client, especially where there are issues of non-disclosure.
Nothing to hide
The truth about claim rejection is that the individual possesses the power to safeguard their own pay-outs. One way of doing this is by making full and complete disclosure at the outset, so that the insurer has the opportunity to make an accurate assessment. If your health should change after the policy is issued, you have the peace of mind that you will receive exactly what you expect.
If you have a family history of critical illness or would like peace of mind for you and your family in the long-term speak to your adviser about Liberty’s Lifestyle Protector cover.
* This article does not constitute tax, legal, financial, regulatory, accounting, technical or other advice. The material has been created for information purpose only and does not contain any personal recommendations. Please consult your financial adviser should you require advice of a financial nature and/or intermediary services. Liberty Group Limited (Reg. no 1957/002788/06) is a registered Long Term Insurer and an Authorised Financial Services Provider (FAIS no 2409).