De­clined death ben­e­fit claims

RISKSA Magazine - - Long -Term -

Ac­cord­ing to Dempsey, fully un­der­writ­ten life poli­cies will hon­our claims pro­vided that: within the first two years of tak­ing out the pol­icy

ex­cluded con­di­tion in­for­ma­tion from the in­surer when ap­ply­ing for the pol­icy. He re­ports that the num­ber one rea­son pro­vided by life in­sur­ers for de­clin­ing claims con­tin­ues to be non-dis­clo­sure which ac­counts for 75.8 per cent of claims de­clined in 2014 and 61.9 per cent in 2013. Dempsey de­scribes the prac­tice of nondis­clo­sure as in­cred­i­bly short-sighted due to the very real risk that the hid­den in­for­ma­tion will sur­face at claims stage which may re­sult in ben­e­fi­cia­ries be­ing left fi­nan­cially des­ti­tute.

Sui­cide

The num­ber of claims de­clined due to sui­cide dur­ing the stan­dard two-year ex­clu­sion pe­riod dropped from 24.1 per cent in 2013 to 13.3 per cent in 2014 – a sig­nif­i­cant decline. The sui­cide ex­clu­sion pe­riod is in­sti­tuted to pre­vent some­one from tak­ing out life cover with the in­ten­tion of com­mit­ting sui­cide shortly af­ter­wards. No death ben­e­fit will be payable to the ben­e­fi­cia­ries if the life-in­sured takes his own life dur­ing this pe­riod.

Un­der­writ­ing ex­clu­sions

Of all claims de­clined in 2014, 8.1 per cent was due to the death of the pol­i­cy­holder be­ing caused by a con­di­tion specif­i­cally ex­cluded by the pol­icy. For ex­am­ple, if an oth­er­wise healthy pol­i­cy­holder suf­fers from di­a­betes, the life in­surer may ex­clude this con­di­tion from the life cover. This means that if the pol­i­cy­holder dies of a cause un­re­lated to di­a­betes, the life pol­icy will pay but the claim will be de­clined if the death is re­lated to the ex­cluded con­di­tion. Ex­clu­sions like th­ese al­low in­sur­ers to pro­vide life cover to peo­ple at af­ford­able rates. Crim­i­nal in­tent, by ei­ther the pol­i­cy­holder or the ben­e­fi­ciary, was an­other cause of death ben­e­fit claims be­ing de­clined last year and it ac­counted for 2.9 per cent of de­clines com­pared to 4.6 per cent in 2013. Claims fraud can in­volve sub­mit­ting fraud­u­lent doc­u­men­ta­tion and/or syn­di­cate ac­tiv­ity aimed at get­ting the life com­pany to pay a claim to some­one not en­ti­tled to the ben­e­fit.

Guide­lines to en­sure full dis­clo­sure from clients:

im­por­tance of com­plete hon­esty in their an­swers

their im­me­di­ate fam­ily

oc­cu­pa­tions that in­volve risky ac­tiv­i­ties Dempsey high­lights the con­tin­u­ous evo­lu­tion of un­der­writ­ing pro­cesses and the ac­com­pa­ny­ing im­prove­ments ben­e­fit­ting pol­i­cy­hold­ers and con­tribut­ing to the av­er­age cost of life cover that has de­creased over the years. “Ad­vances in the med­i­cal treat­ment of chronic con­di­tions have also re­sulted in re­vised un­der­writ­ing prac­tices, re­sult­ing in fewer ex­clu­sions and a de­crease in the cost of life cover,” he says.

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