Arun and Geeta did not have life insurance, and met with an insurance adviser, Raj, to discuss their needs. Arun and Geeta completed an application form. The only medical information on Arun’s form was that his father had diabetes. The insurer accepted both Arun and Geeta’s application.
About four years later, Arun and Geeta’s adult daughter, Manisha, asked her father how he was able to get life insurance because, about two years before applying for the insurance, Arun had had a heart bypass operation. At Manisha’s insistence, Arun contacted Raj to check that the life insurance policy covered him, even though he had had a heart attack.
Raj was unaware of Arun’s heart attack and immediately contacted the insurer. The insurer advised that it had no option but to cancel Arun’s health insurance because Arun had failed to disclose his heart attack.
Arun said he told Raj about the heart attack when applying for the insurance, and Raj had said the insurer would check Arun’s medical records before approving cover. Arun had trusted Raj, but Raj had let him down. Arun considered Raj should refund all the premiums he had paid. Raj declined the refund, saying it was Arun’s fault for failing to disclose the heart attack on the application form. Arun did not agree and, with Manisha’s help, referred a complaint to FSCL.
It seemed to us that, as the insurer had cancelled the policy and treated it as never existing, the insurer may agree to refund the premium.
We contacted the insurer, (not a FSCL participant), and although it did not accept it was obliged to refund the premium, in the interests of resolving the complaint, it offered Arun a full refund of all the premiums he had paid, approximately $4,600.
Arun was delighted with the outcome and accepted the insurer’s offer in resolution of his complaint with Raj.
We were delighted to see the insurer’s willingness to work with us to resolve a complaint. However, it was concerning that such a serious medical condition was not disclosed on the application form. While we did not fully investigate the complaint, so do not know where the breakdown in communication occurred, Arun is not the first complainant to tell us they were told not to worry about disclosing a medical condition on the application form because the insurer will check their medical records before approving cover. We suggest that advisers stress to clients the importance of full disclosure, and the consequences for clients of failing to mention a pre-existing medical condition.