Over recent years the protection industry has been working hard on solutions that will improve the customer experience at point of sale and bring consistency to the treatment of claims where non-disclosure comes to light.
This work has culminated in the Association of British Insurers publication of new guidance for the treatment of cases on non-disclosure.

Two of the common objections used by advisers and consumers to justify their mistrust of protection have been the complexity of the application process and the concern that claims wont be paid.

To improve the application process many insurers have improved the clarity of the questions in their proposal forms. More radical has been the increasing use of tele-interviewers and tele-underwriters who take the responsibility for asking those tricky medical questions away from the adviser. This has two benefits. Firstly, because the questioning is carried out by skilled interviewers, the quality and relevance of the medical information gathered is improved. Secondly, it removes the responsibility for the collection of sensitive and sometimes complex medical information from the adviser. The result is a lower risk of non-disclosure and speedier underwriting decisions.

The new ABI guidelines complement these point of sale improvements by bringing much needed clarity and consistency to the treatment of cases of non-disclosure, where, had the correct information been disclosed, there would have been a different underwriting outcome.

The guidance breaks non-disclosure down into three categories; innocent, negligent and deliberate or without any care.

Where the non-disclosure is innocent, that is, where the proposer acted honestly and provided the information that a reasonable person would consider relevant, the claim should be paid in full.

Where it is negligent, which includes anything from an inadvertent mistake to serious negligence, the insurer is able to apply a proportionate remedy. This is designed to place the customer in the same position as an identical customer who had accurately disclosed at outset. For example, where the premium would have been rated, the amount paid at claim will be equal to the amount of cover that would have been offered for that level of rated premium.

If the non-disclosure is deemed deliberate or without any care the insurer is entitled to decline the claim and cancel the policy from inception. The guidlines suggest that this course of action should be confined to the most serious cases.

These developments are evidence of the protection industry’s commitment to the principle of treating customers fairly. By dealing with two of the main historical deterrents to protection this should rejuvenate confidence and start us on the road to closing the widely publicised life assurance and income protection gaps.

 A copy of the guidance is available from the ABI website: Download the document