“Switching insurance providers is turning into a national pastime,” a broker told me last week. “Everyone is looking for what they hope will be cheaper cover – for their car, their home and contents, for life and health insurance.
“What not everyone is doing however, is filling out their application properly, and some of them are finding out how costly that could be.”
This particular broker says he’s seeing an increase in people who have been rejected by insurers on the grounds of “non-disclosure,” that is, “for not being entirely frank about their claims history or pre-existing health conditions.”
Underwriters, they say, are getting tougher. Not only have their claims gone up significantly in the past year due to weather events, but the recession has caused an upsurge in burglaries and other theft claims. Throw in lower investment returns on the insurer’s own portfolios, and premiums are on the rise.
Online discount motor or home insurance brokers in particular are able to offer lower premiums because not only are the policy benefits pared down, but they usually require you to both select the policy and fill out the forms yourself. The person at the end of the phone or internet is not there to double-check your answers and jog your memory about previous claims.
“Not every case of non-disclosure is intentional,” I was told. “For example, I have a client who lived in rented accommodation, had a burglary soon after they moved in – they didn’t have an alarm – but made a successful claim on their contents-only policy.
“A couple of years later, they bought a house, had a burst pipe and made a claim. But this new claim was rejected after the insurer discovered they had a previous payout they hadn’t declared, because they didn’t think they had to.
“Not only that, but the insurer declined to renew their policy and no other company would take it either. I was able to convince their home insurer to change their mind, but only with a sizeable premium ‘loading’.”
Once upon a time, the insurer might have overlooked a case like this – depending on the size of the claim – but not now, says the broker. Being on the Irish ‘Insurance Link’ register as having had a claim rejected for non-disclosure could affect future insurance applications as well, he added.
It isn’t just motor and home policies that require full disclosure. Others include:
All applicants must reveal if they’ve ever been turned down for life cover, but also their own medical history (including medical investigations) and that of their immediate family, such as parents and siblings who suffered various diseases, conditions and/ or their cause of death. Depending on the cause of your death, not disclosing this information could result in the death benefit not being paid to dependants or beneficiaries.
Income protection insurance:
This pays all or part of your income up to retirement if needs be, in the event of illness or disability. But it too requires that the applicant not just reveal any existing medical condition and previous health claims, but also give an accurate disclosure of the type of job you do. Claiming to be an “administrator” when in fact you’re a construction foreman, is always going to end in tears if you want income protection insurance.
You must reveal pre-existing medical conditions if you apply either for private health insurance or serious (also known as “specific”) illness policies, the latter of which pay tax-free lump sums in the event you suffer one of the listed illnesses or conditions.
Premiums are not affected (due to our community rated system) but health insurance exclusion periods are typically up to five years in duration. This means that you cannot expect to claim benefits related to any treatment or services regarding a heart condition, for example, until the exclusion period ends. (In the case of maternity cover, you can’t make a claim for the first 52 weeks in which you are an insured member.)
A previous serious illness that you have survived does not discount you from getting a policy quotation, but that condition may not be covered or the premium is likely to be higher, say brokers. Not disclosing a previous serious illness is likely to result in any claim being rejected.
You have to be extra careful regarding travel insurance, say brokers, referring to how some policies are automatically issued as part of a some bank or credit card company accounts. If you’ve made a travel claim in the past, and now have a “gift” policy with your bank/credit card account, check with your bank or read the new policy carefully to ensure that previous claims will not prevent new ones being honoured on non-disclosure grounds.
Independent brokers always want insurance customers to come to them rather than search the web for discount providers. I think there’s a place for both, the latter if you are diligent about examining all the terms and conditions very carefully before you buy the policy.
Since reading contracts extra carefully is something few of us ever do, using a good, experienced broker (and a fee-based one for any investment related policies) might save you a great deal of money someday.