Life Cover Blog

Summary
This article explains how Financial Protection Insurance may grow to be more popular
with the insurance industry finally making positive steps that could hopefully be successful.
Most trained  advisors would concur that Mortgage Insurance is extremely important to the majority of families, whether it may be a  precaution in the event of prolonged illness, premature death, cover for an accident or loss of employment (especially in the present economic climate).

Life Insurance is the basis of all financial assurance to ensure a lump sum that is not taxable, in the event of a death or for cover for a mortgage.  Unfortunately, a percentage of other Financial Protection Insurance policies, do not do not have similar reliable qualities and have been branded as being miss-sold.  Also, based on what we are now aware, critical illness insurance has suffered owing to shocking exclusions from policies making it possible for insurers to reject claims even when they are genuine.

In spite of this, a little confidence was re established when Norwich Union reported on the conclusion of claims on Critical Illness policies on their half yearly statistics. 

Critical Illness Insurance claims were being declined because customers did not disclose their full health history.  As a result Legal and General  says that in the last 5 months the number of refused claims has plunged substantially from 5.7% in the last year, to 2.3 per cent.

Why?  We think, not simply Aviva but all insurers, because of destructive public relations, have been placed in a situation whereby they must reduce the amount of claims that are rejected. Does this confirm how forceful the media can be?  Debateable perhaps – you may think we are sceptical but we think there are other factors that encouraged the insurance companies to make modifications.  Lately, as a consequence of dire media, sales of Critical Illness policies  have dropped which in turn has obviously impinged on the insurance company’s profit. This is more likely to have been the catalyst to promote change!

Friends Provident, Norwich Union, Scottish Provident and Axa have introduced some major alterations specially created to diminish their rejection rates. Firstly, they silhouette clearly that all health disclosure, however minor a visit to a Doctor could have been, must be revealed.  Axa, together with others will get a medically trained person to telephone every candidate to go through all the particulars of their medical record.  If the policy then goes on risk, some policyholders are being told that it is important that they provide complete medical disclosure and they are permitted to add or put right any details on their application.

The Insurance Company may then re-assess the risk and if it is thought to be increased the monthly payments will likely be increased – which looks more sensible and ultimately more acceptable than paying the original payment then having a claim rejected as a result of non-disclosure of medical history.

These measures should have been taken by the Insurance Companies years ago as the public’s understanding of Protection Insurance has  deteriorated by their somewhat strange approach. On a positive note, there is a clear and necessary need for protection insurance so we can hope that it is able to restore faith and then the popularity it rightly merits.