Fi­nan­cial hor­ror story shows pol­icy dis­clo­sure law un­fair

Central Leader - - OPINION -

Here’s a mo­ment of fi­nan­cial hor­ror for you.

You have an in­come pro­tec­tion pol­icy to pay the bills should you fall too sick to work but when you make a claim, the in­surer says no.

It says you failed to tell it some­thing you should have when you ap­plied for the pol­icy so it is tear­ing it up.

You’ve wasted all those pre­mi­ums on the illusion of in­sur­ance.

This hap­pened to a friend of mine re­cently, Jackie Gower, a money blog­ger who writes about life in strug­gle street.

Gower is no fool and she’s not the first and won’t be the last to fall into the in­sur­ance ‘‘non-dis­clo­sure’’ trap.

She’d bought her pol­icy from a bank and made the ap­pli­ca­tion in the branch.

She’d an­swered the ques­tions asked of her, few though they were, and then signed up for the cover.

The ques­tions, she says, were fairly generic and Gower did what many do: She failed to take them se­ri­ously enough. She signed the con­tract cer­ti­fy­ing ev­ery­thing she had told the in­surer was ac­cu­rate.

It wasn’t. She’d not ‘‘dis­closed’’ as­pects of her med­i­cal his­tory. When asked if she’d sought med­i­cal ad­vice in the last five years, she as­sumed it meant for any­thing se­ri­ous.

She’d an­swered ‘‘no’’ when she had been to the doc­tor’s on a num­ber of oc­ca­sions and she’d not ‘‘dis­closed’’ the his­tory of can­cer in her fam­ily.

Un­der our cur­rent in­sur­ance laws, even in­no­cently fail­ing to men­tion some­thing that an ex­pe­ri­enced un­der­writer would want to know be­fore is­su­ing a pro­vide a pol­icy gives the in­surer the right to tear it up.

Given that 99.9999 per cent (roughly) of us are not ex­pe­ri­enced un­der-writ­ers, the law is deeply un­fair.

And it’s not just me who thinks that. The In­sur­ance Om­buds­man thinks it too. So does the Law Com­mis­sion. A fair law would re­quire in­sur­ers to ask for the in­for­ma­tion they ex­pect peo­ple to give it.

You’d think they would be scrupu­lous in this, ex­cept they want to put as few blocks in the way of sell­ing a pol­icy as they can.

If they asked peo­ple to at­tach a copy of their med­i­cal records to their ap­pli­ca­tions, there would be no is­sue but that would dis­rupt sales.

They could re­quire peo­ple to give them med­i­cal records within three months of tak­ing out a pol­icy and, if need be, re­cal­cu­late the pre­mi­ums or close the pol­icy.

That’d raise costs but at least peo­ple would know their cover wasn’t an illusion.

Gower’s case has a happy end­ing.

She got an­gry, ar­gued stren­u­ously that the bank should have asked for the in­for­ma­tion it wanted with clear, un­am­bigu­ous ques­tions. It should have asked for her med­i­cal records up front.

She’d damn well kick up a stink in the me­dia, if need be, she told the bank. And it backed down, even though the law was on its side.

Why hasn’t the law changed de­spite calls for change? I think it is be­cause no­body has proved the harm done by ac­ci­den­tal nondis­clo­sure.

No gov­ern­ment has ever gone look­ing for the fig­ures which are buried in in­sur­ance com­pany fil­ing cab­i­nets and dig­i­tal records of claims turned down and poli­cies torn up.

How big is that harm: $5 mil­lion a year de­nied to strug­gling fam­i­lies? $10m? More? We will not know un­til some­one armed with the power to gather that in­for­ma­tion goes look­ing.

Gower won her fight but how many oth­ers lack her de­ter­mi­na­tion and lose theirs?

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