Tuesday, June 30, 2015

Poor claim handling standards in Singapore

I have been consulted on a few occasions about rejected critical illness or medical claims. The policyholder contracts a serious illness and submits a claim. The insurance company checks with the hospital or polyclinic and found record of a previous consultation which was not declared to the insurance company. On some occasions, the consultation was made several years earlier.

The policyholder told me that they did not declare the consultation because they was not aware of its significance. They did consult the doctor who assured them that the medical condition was not serious. It could be a borderline hypertension, but the doctor felt that it was not necessary to go on medication. This non-declaration, even though it was not intended, has often led to a rejection of the claim.

In many cases, the rejection was unjustified. However, it seemed to be a practice for the claim officer to look for a reason to reject a claim, and the alleged non-disclosure was a convenient reason.

Under the life or general insurance policy, there is usually a non-dispute clause. This clause states that the insurance company cannot dispute a claim on grounds of non-disclosure after a lapse of one or two years from the issue of the policy, "except in the case of fraud". Some claim officers argue that non-disclosure is fraudulent. They are mistaken. If challenged in court, they are likely to fail.

In some countries, the insurance company is more careful about disputing claims on such flimsy grounds, as they might be sued for punitive damages for their bad behavior or unreasonable rejection of claims. The actions are usually taken by the authority, acting in the interest of consumers, or by lawyers working on "success fee" basis - i.e. they lawyer do not charge any fee if they failed to get compensation for the victim. Unfortunately, we do not have these practices in Singapore.

Because of the poor claim handling standards in Singapore, I often advise consumers to avoid putting too much trust in insurance companies. It is distressful to be paying a large premium to an insurance company for the "peace of mind" only to find that the insurance company had rejected a claim unfairly.

For critical illness and medical fees, I prefer to rely on personal savings, rather than pay a large premium for an uncertain cover.  I advise buying personal accident insurance to cover accidents - which is usually more certain in settlement, compared to the other classes.


Anonymous said...

It is often the fault of the agents. They are interested in closing the case. Without closing there is no commission. Asking the client too much or warning and requiring the clients to disclose too much may result in putting off the client or too much disclosure of illnesses in the application may not pass the underwriting.. To the agents at the application stage there should no trouble; whatever happens later is another matter. Secondly , the case may or may not result in claim. So why worry now when commission is most important now.
This is the attitude of insurance agents. Putting the clients' interest first and above his or hers? who cares!!!!

Anonymous said...

The system rewards the dishonest & incompetent & penalizes the one who pays & the innocent.

Anonymous said...

Thanks you for another insightful advice

yujuan said...

Felt like being stricken with lightning when premiums for my NTUC Medishield Insurance shot up by 100% this year.
Would lightning strike again if my premium shoot up once more when Medishield Life takes effect this year end.

Suresh.g said...

Thanks for the informative article! waiting for your next post.- health insurance policy

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