I bought a medical insurance but forget to declare that I have hypertension. I went for a kidney operation and the insurance company wanted to reject the claim due to non-disclosure, although the kidney condition is not related to hypertension. Is this fair?
REPLY
If you had declared hypertension, the insurance company would have loaded up the premium due to this medical condition.
As you have been paying a lower premium, compared to the loaded premium, a fair approach is for the insurance company to pay the claim on a pro-rata basis, i.e. based on the premium that you have paid compared to what you would should have paid, if the condition had been declared.
This approach of paying pro-rata has been applied in many situations, e.g. if a property had been underinsured, and can be applied here. It is fair to the insurance company and to the consumer.
Which company is this?
ReplyDeleteMr.Tan,
ReplyDeleteHave to disagree with you on this point. One of the leading cause of kidney failure is due to high blood pressure. HPB can cause many other conditions, besides kidney problems, such as stroke and heart attack.
The insurer may have totally decline the proposal if HPB was even declared from the onset.
Moreover, insurance contract is based on goodfaith. The breach of goodfail renders the entire insurance contract void. This is provided for in the Insurance Act and stated again in large print and BOLD at the top of every insurance application.
This person "forgot" to declare HPB in his insurance application. Can we really believe that? A person with HPB takes his medication on a daily basis - can he "forget" his condition? Quite obviously he was trying to take the insurer for a ride.
Moreover, using the general insurance's averaging (pro-rata for underinsuring property) isn't applicable for health and life insurance. For property, the amount underinsured and the property price can be determined quite accurately. In other words, the financial risk intended to be transfered to the insurer and the actual risk transferred to the insurer can be determined quite accurately. For life and health, you cannot put an accurate number to how much is the HPB guy underinsured. For all you know, the HPB guy was completely uninsurable anyway.
Reply to post 3:14 AM
ReplyDeleteThere are many people who have hypertension, and are insured for life and health insurance at the standard or loaded premium, depending on the seriousness of the condition.
Many insurance executives just take the excuse to reject a claim on the grounds of non-disclosure, without considering the actual facts and fairness of their decision.
This has led to view of many policyholders that "insurance companies cheat their customers".
Insurance companies should be fair in their decision on such matters, if they wish to win over the confidence of the public.
Mr. Tan,
ReplyDeleteBut you have not considered the possiblity that the policyholder could also intent to cheat the insurer for non-disclosure. For example, the person who wrote you the email said that he "forgot" to disclose the HPB. You think this is true? It is hard to say he deliberately cheated or was an honest mistake. Nevertheless, if an insurer would to award the claim like what you have described to all such cases in which the insured "forgot" to declare, who ultimately bears the increased in probably of claims? Certainity it will never be shareholders of insurers. It will be the policyholders. As a policyholder myself, I will never allow the insurer to award claims to cases which there is a breach of goodfaith. If the insurer I am insured with does this, I will certain complain the matter to MAS that the insurer has enacted unfairly to existing policyholders. Existing policyholders would be penalised by either increased in premiums or a decreased in benefits. No free lunch in this world.
Hi 8:51 AM
ReplyDeleteIt is not correct for you to imagine the worst case, that the policyholder intends to cheat the insurance company.
Most policyholders are not willing to take this risk, as their claim will be rejected.
I believe that the non-disclosure is likely to be unintended or the agent failed to ask for the information.
However, the insurance claim manager can find out the facts and make a fair decision.
I do not rule out the extreme case, it is possible that the policyholder would have been rejected at the underwriting stage.
You are clearly from the insurance industry. I am afraid that your approach (i.e. of imaging the worse case) is what creates the impression that "insurance company cheats the public".
Mr. Tan,
ReplyDeleteThere is nothing for the policyholder to lose and no risk involve to "cheat" the insurer for non-disclosure.
If I have a pre-existing illness especially one that is serious or is a chronic disease I will have two choices:
(1) Declare the pre-existing illness but risk exclusion or total decline. Shield plan normally do not offer loading. But if total decline, there is no coverage. If there is an exclusion, many illness indirectly link to the illness is excluded. So it will be as good as no coverage OR
(2) Do not disclose and hope for the best. When comes to claim there are two outcome: Rejection or Acceptance.
There is nothing to lose for the insured to go for (2) because his worst case lost is his premium. But there is a small chance he can claim everything. Also, if his claim is rejected, he can make some noise by complaining to the mass media and the insurer will just refund all his premium just to keep him quiet.
If you on the ground speaking to the man-in-the-street in the advisory role, you will find this mentality in many policyholders. But the role of the adviser is to tell these policyholders that this thinking is a breach of goodfaith and is incorrect to non-disclosure.
It is also hard to say that non-disclosure is not liberate. The Insurance Act on the importance of disclosure is printed in BOLD and large print right at the top of the insurance application. It is not a fine print like those tiny small print found in hard to understand legal words.
The adviser play an important part to ensure that a client do not "Forget" to declare any medical condition.
ReplyDeleteIf an adviser is to go through each question slowly with client, the client will not likely forget that he or she has a medical problem unless he/she has the intend to hide the problem.