Why some claims get rejected and what you can do to help

29 June 2020
Every year insurance providers release their claims paid statistics for the previous year.

Neighbours drinking coffee on steps

But outside of our industry, this isn’t really seen as news. There’s a preference in the consumer press for stories about unpaid claims and the unfairness of it all. But hopefully, greater transparency and more education will help us to pay more claims. In this article I’ll provide a bit more insight into claims and why some don’t get paid.

Life cover 

There are two main reasons life cover claims aren’t paid: a policy exclusion and misrepresentation.

Although volumes are small, the most common exclusion to be invoked on a life cover claim is because of suicide. Understandably almost all providers have an exclusion for suicide within their policy – in the case of Royal London we won’t pay out a life cover claim if the life assured commits suicide within 12 months of the start date of the plan. 

Tragically suicide is the leading cause of death for men and woman under the age of 35 in the UK*, and the COVID-19 pandemic, and all of its consequences, is likely to place even greater strain on the mental health of the population. The importance of good mental health and the understanding of mental health conditions has improved over recent years but highlighting this exclusion to your clients may open up an important conversation with them and the reason why they want to take out this cover.

When it comes to life cover claims that are rejected due to misrepresentation, the information not disclosed needs to be pretty severe. We’re not talking about a slight discrepancy in height or weight, or a typically minor condition like asthma or irritable bowel syndrome. The information usually needs to be so significant that, had it been disclosed, cover would not have been offered.

For example, in 2019 we unfortunately had to decline a claim for a 48-year-old female who submitted a clean application in 2018. Sadly, she passed away a year later due to a heart attack. During the claims assessment it became apparent the customer was much heavier than she’d told us when she applied and hadn’t told us that she’d had poorly-controlled diabetes since age 32. Had all this information been declared on the application form, we wouldn’t have been able to offer cover.

This shows how you can help by ensuring that all medical questions are fully asked and answered will help to avoid any nasty surprises for the client’s family, should they need to claim. Better to discuss it at the start where it can be evaluated, rather than at the end when it’s too late.

Critical illness

It’s interesting to look back at old critical illness (CI) claims statistics and compare them to what we see now. Although the most common reasons for claim have remained consistent (cancer, heart attack, stroke etc), the definitions less commonly claimed for look very different. This reflects that CI products have become wider, covering much more than even a few years ago. Now we pay claims every year for ductal carcinoma in situ, an early form of breast cancer, when in years gone by it would have been excluded. And in 2019 we paid several claims for pregnancy complications, a feature we added to our Critical Illness product in 2018.

But claims being declined due to definitions not being met does still happen – CI definitions won’t cover everything, so reviewing the cover that a client has in place to make sure it continues to meet their needs is important. 

Misrepresentation however, continues to have an impact on why claims are rejected. I know all protection providers say this, but I can’t stress enough that it’s better to include too much information on the application than not enough – let the underwriter decide if it’s important or not. And if you or your clients are unsure about anything – you can always ask the underwriter handling the application, as they should always be able to give the help and support you need.

To bring both aspects discussed above to life, here are two examples of critical illness claims declined in 2019:

  • A 45-year-old female who applied for cover in 2016. She submitted a claim under the heart attack definition of her CI policy in 2019. The medical evidence confirmed that she had been diagnosed with myocarditis – inflammation of the heart muscle.  As she wasn’t diagnosed with a heart attack we couldn’t pay the claim.
  • A 41-year-old male who took out the plan in September 2018. He told us he was an ex-smoker and had a family history of Non-Hodgkin’s Lymphoma.  In early 2019, he submitted a claim for bowel cancer and the medical evidence confirmed he attended his GP with symptoms of abdominal pain in June 2018 and was referred to hospital for further investigations. He didn’t attend those investigations until after the policy commenced.  Had we been aware of these outstanding investigations,  we would have postponed cover and therefore the claim was declined. 

Income protection

A significant challenge with income protection is ensuring the cover selected is appropriate not only at the outset but that it continues to be suitable for years down the line. This can have an impact at claim stage if, for example the applicant doesn’t know what benefits they get from their employer in the event they’re off sick. And if your client changes job and receives an improved benefits package this could mean that their income protection plan should be adjusted too. This is because an employer’s sick pay package could directly impact the amount of cover required, and also the chosen deferred period.    

Here is an example of how employer benefits and sick pay can affect an income protection claim:

  • A Management Consultant has an income protection plan with a deferred period of four weeks. He was unable to work for eight weeks due to a fractured arm sustained in a road traffic accident.  His employer paid him full pay for the first six months of any absence as part of his company sick pay arrangement, after which he is entitled to statutory sick pay. This means that his claim for income protection wasn’t financially valid – a deferred period of six months would have been more appropriate.  Fortunately, we were able to pay a claim under fracture cover for this customer.

More and more customers will have different sick pay structures, and this may change whenever they change their job. This situation is particularly relevant to individuals employed in the NHS. This is why we now include cover which adapts itself to the circumstances of the NHS sick pay structure by offering flexible deferred periods for NHS medical professionals.

Own Occupation definition is now offered to all customers as standard by most providers and is clearer and easier to satisfy. Some older plans though may use the any occupation or work tasks definition where meeting the definition can be harder. So, it may be worth checking the terms and conditions of any old plans, as it may be another opportunity to review your client’s cover.

The claims checklist

With protection claims, we’re always looking at ways to pay more - and the percentages of claims that aren’t paid are always very much in the minority. But to provide more support, we’ve produced a handy claims checklist. Simply running through this at the application stage will not only help your client should they need to claim, it’ll also help to highlight the value of your advice, which will be all the more valuable and rewarding when your clients have their claim accepted and they receive the support they need at their time of need.

*Source – www.ons.gov.uk Leading causes of death UK, 2001 to 2018  (March 2020).




About the author

Craig Paterson

Chief Underwriter

Craig has been in an underwriting, claims or proposition development role since 2000. He started his career at Scottish Widows before moving to Bright Grey shortly after it launched in 2003 and then Royal London when Bright Grey rebranded in 2015. He’s passionate about claims and the impact they can have on people’s lives, not just the financial pay out but also the package of support services that can be provided – he can’t overstate the feeling you get when telling someone that their claim’s been accepted. Outside of work, Craig has a young family so his spare time is precious, but if there’s some it’s usually filled by playing football or golf.

This website is intended for financial advisers only and shouldn't be relied upon by any other person. If you are not an adviser please visit royallondon.com.

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.