LV= has given advisers a series of recommendations on how they can help avoid their clients’ claims being declined due to misrepresentation.
In 2023, the mutual paid out 94% of protection claims, but of the 6% not paid, threequarters were declined due to misrepresentation.
As a result it is highlighting how support from advisers during the application stage can lead to fewer declined protection claims and better outcomes for clients.
LV=’s previous Wealth and Wellbeing Research Programme found clients had misconceptions about the claims process and why a claim may be declined, which could impact their ability to answer underwriting questions correctly and may lead to deliberate misrepresentation.
Five key areas
The insurer identified five areas that advisers should explain to their clients early in their conversations and ensure they understand to minimise misrepresentation:
- How misrepresenting their information can lead to rejected claims later
- The insurance policy will be honoured provided it meets the conditions and they have not
misrepresented their situation - An insurer will verify the information at point of claim which will involve looking at their medical records including test results, investigations and timelines of symptoms
- While misrepresenting information like BMI, alcohol units, or smoking status may result in cheaper premiums now, it can ultimately render their policy void when they need it
- Honesty is always the best policy, especially when dealing with insurers
LV=’s latest Fuel for life report also explained how advisers can help clients to avoid accidental omissions.
The report tells advisers: “Explain to your client that you want to make sure you haven’t missed anything. Ask a bit more about their general health history to help jog their memory if they’ve missed anything.”
Relevant areas that should be discussed with clients include:
- Recent GP appointments
- Hospital appointments
- Prescriptions
- Stays in a hospital
- Visits to a physiotherapist or chiropractor
- Waiting lists
- Test results (both received and pending)
Open conversations
LV= told advisers: “When it comes to talking about their health, there may be areas that are uncomfortable for your clients to discuss but it continues to be extremely important to have honest and open conversations to ensure applications are accurate, giving your clients the best possible outcomes if they find themselves needing to claim.“
The report highlighted three ways to help clients avoid misrepresentation:
- Introduce the concept early, don’t wait until they’ve already given their information; it’s harder to back track than get the right information first time around
- Make your client aware of the possible outcome of not disclosing information or presenting misleading information in their application
- When arranging cover for a couple, always speak to each applicant directly rather than allowing their partner to answer for them. Also, give both applicants an opportunity to disclose their health conditions separately as there may be details they want to keep private.
Advisers should also use pre-underwriting tools to give clients peace of mind if they’re worried about a pre-existing condition or other risk factor that might impact their application.
At application, LV= said advisers should:
- Fill out the application with your client present, so they can support them if there is any ambiguity over the questions asked
- Ask the client to double check their answers before submitting the application
And once the policy is live, LV= said advisers should remind clients they will receive a summary document where they will have the opportunity to check their answers again, and that they should flag any inaccuracies as soon as possible.
LV= said advisers should make sure the client is confident with how to check their policy documents as this can help the client understand what an eligible claim would be.
Addressing BMI successfully
Speaking on the issue of how advisers can improve their conversations around body mass index (BMI), Emma Thomson, head of protection development at Sesame Bankhall Group said: “Weight can be a sensitive area for many people, and not everyone regularly weighs themselves either.
“It’s important to listen out for any hesitancy in the answers given, or answers such as ‘I’m about 16 stone’. ‘About 16 stone’ is not what the underwriters are asking for and it could lead to a declined claim if that’s not correct.
“If it’s clear the customer is not certain about their measurements, politely explain the underwriters need up to date information, that as the adviser you want to ensure any claim is paid and ask them to weigh themselves.
“After all, they may weigh less than 16 stone.”
Three types of misrepresentation
LV= said it dealt with three different types of misrepresentation.
Innocent misrepresentation is when a client does not disclose relevant information at application because they were not aware of it. For example, family medical history they did not know about.
Another type is careless misrepresentation; when a client leaves out relevant information when they take out their policy because they either forgot or did not think it was relevant. This may be an old injury that has healed or an illness they considered short term.
The third type is deliberate or reckless misrepresentation; when a client deliberately chooses to not disclose relevant information with the intention of misrepresenting their health – for example a medical diagnosis they were aware of.
LV= said while the data shows that a rejected claim is the exception not the rule, it’s survey of 4,000 adults in December found 56% of respondents thought insurers did not want to pay claims.
And when asked, 15% of UK consumers would never feel comfortable disclosing their health conditions when answering protection insurance questions.
The LV= research also found that more than a third (36%) of UK adults were living with a long term physical or mental health condition, but nearly a fifth (18%) worried that when taking out a policy their claims would not be paid due to the ‘small print’.
Crucial support
Mike Farrell, protection sales and marketing director at LV=, said: “Sadly, although only a small percentage of claims are declined, most of our declined protection claims could have been avoided if the right information was provided to us during the application stage.
“We encourage advisers to ensure that people applying for protection cover understand the impact that non-disclosure can have on invalidating their policy.
“While discussing sensitive personal information is uncomfortable for many, it is important for applicants to be transparent and always share medical history so that advisers and insurance providers can easily find the best cover for them.”