Recent Court cases serve to highlight problems with critical illness insurance. The bad publicity is not always deserved but does raise important issues. The insurance industry needs to sort its act out now - after all almost everybody needs critical illness insurance.

Critical illness Insurance - The press are giving insurers a hard time.

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Recent stories in the press have again lambasted the insurers over critical illness insurance. The core problem is that a critical illness claim is not as straightforward as, for example, a claim under life insurance. With life insurance its going to be hard for the insurance company to argue that youre not dead!

By their very nature, critical illness claims are much more complicated. The ( personal loans ) insurer will need to satisfy itself that the claim is validated in three key areas before it meets the claim: -

Has the illness been correctly diagnosed?
Is the confirmed illness included in the schedule of insured critical ( medical insurance ) illnesses covered by the policy?
Did the policyholder fully disclose their medical history and current state of health on their original application form?

On the first point, its obviously in the policyholders interest to verify the ( home insurance quotes ) medical diagnosis - so theres rarely ever any conflict between the insurance company and the policyholder on that issue. Its the next two areas which the insurer needs to validate, where conflicts seem arise. (cheap car insurance)

With constant development in the medical knowledge, from time to time there can be some situations where validation falls into a grey area - a policyholder will argue that their specific illness is insured whereas the insurer will argue that it isnt. Insurance companies are aware of this problem and they often change the wording in their policies in an attempt to clarify the scope of the cover and eliminate areas for dispute. Nevertheless, disputes do happen all too frequently and sparks fly when a policyholder thinks his illness is covered but the insurer disagrees.

A case in point comes before the Courts shortly. Mr Hawkins from Staffordshire is suing Scottish Provident for £400,000 under the terms of his critical illness policy. Basically, his medical advisers believe his illness is insured whereas the insurers medical advisers disagree. If the Court find in favour of Mr Hawkins the press will have a field day - and the critical illness insurers will suffer further bad press they can sorely afford.

Another summons, filed recently in the High Court and again involving Scottish Provident, highlights the problem when an insurer considers that a claimant mislead them on his or her original application form. Our understanding is that if an applicant omits relevant information or provides misleading information on their application from, this amounts to obtaining insurance on false pretences. This summons has been issued on behalf of Thomas Welch from London who is suing Scottish Provident for £206,800. The issue goes back to 2000 when, a few years after first starting his critical illness policy, Mr Welch received confirmation that he was suffering from testicular cancer. The insurer refused the claim because of "non-disclosure alleging that Mr Welch had not been honest about his smoking habit. He does admit that he did smoke earlier in his life but is resolute in saying that he had long since given up when he applied for critical illness insurance. As such, Mr Welch believes that he did complete the application honestly.

We assume that the case will centre upon whether Mr Welch accurately answered the smoking questions on his application. Most insurers define "a smoker" as someone who has smoked, or has otherwise used, nicotine products within the previous 5 years. (Some insurance companies adopt a 1year cut off.) If Mr Welch had indeed smoked during the specified years, he would have been obliged to disclose such information on the application and the insurer would have priced his insurance accordingly. In this context, it is relevant to note that smokers are charged as much as 65% more for critical illness over than non-smokers. We anticipate that Mr Welchs lawyers will argue either that he did not smoke during the period in question or he omitted the smoking information by pure oversight and in any event, his past smoking is not irrelevant to his testicular cancer. Interesting issues and well let you know the outcome. (health insurance)

Mr Hawkins case is fundamentally different. It illustrates the problems that can arise if policy documents imprecisely describe an illness or if the technical diagnosis of an illness provides the scope for medical professionals to disagree. Either way the issues are entirely outside the policyholders control at a distressing time for them and their families and we must appreciate their anguish. The long-term solution must lie in improving the medical definitions within the policy. It is probable that this will result in more medical jargon that the average man in the street will find difficult to understand - but perhaps that is preferable to what Mr Hawkins is going through.

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