“Husband’s moles cost widow R2m,” screamed the headline.
The article, which appeared in Rapport on 5 June, sketched the background to yet another claim refuted on grounds of non-disclosure.
Background
The client was approached by Different Life, a financial services provider that sells life insurance policies underwritten by Old Mutual Alternative Risk Transfer Limited (OMART).
After repeated approaches by the call centre, he took out life assurance in 2017 after a 17-minute telephonic conversation.
The article states he was asked whether “…he ever had cancer or was referred to a specialist for tests and whether he received continuous treatment by a medical practitioner” (my translation). The applicant responded that he had only been to hospital once, when he was four or five, to have his tonsils removed.
In September 2019, the life assured died of a heart attack. Old Mutual refused to pay the claim because the client had neglected to mention that he had moles removed on a number of occasions, the last time in 2013, four years before effecting the policy. The article states that the insurer based its decision on the fact that the moles were “cancerous”.
The article quotes the deceased’s specialist as saying that the particular type of carcinoma for which he was treated was not deadly and did not require treatment. This could be why he did not mention it.
“I told him that certain carcinomas have a 15% of chance of becoming cancerous, and that basal cell carcinomas are not deadly. He does not require chemotherapy or radiation treatment” (My translation).
The specialist was of the opinion that the deceased, like most of his other patients, did not regard this as a form of cancer, which may explain why did not disclose it during the application.
Old Mutual’s response
We asked the insurer three questions arising from the information contained in the Rapport article:
Was this information considered during the assessment of the claim?
“Yes, the process at claim stage is to reconstruct the policy with the information that was not disclosed at sales stage. In this case, when asked, the customer did not disclose that he had a history of basal cell carcinoma (BCC). This is significantly more serious than a ‘mole’. Additional questions related to specialists, procedures (he had carcinomas excised), investigations (a tissue sample was sent for a biopsy) and repeated follow-ups, all of which should have triggered a disclosure of the BCC.”
If the client had disclosed this, as he should have, would Old Mutual simply decline the application, or would it request more information from the specialist and apply a loading on the policy, based on the severity of those results?
“Based on the underwriting rules for this product, had the customer provided accurate disclosure he would have been declined cover (in other words, a policy would not have been issued). As the underwriting process is fully automated, there are no medical or specialist reports requested during the application process. Therefore, if a decision cannot be made without additional medical information, cover is declined.”
In view of the fact that the client died of a heart attack, and not cancer, did Old Mutual consider doing a retrospective assessment of the facts and pay out a pro rata portion of the claim?
“We did a retrospective in that we determined that, had the applicant disclosed the BCC, the policy would not have been issued. As the policy was therefore voided from inception, with a refund of premiums due, there wasn’t cover in place and therefore the claim was not valid.
“There are two key insurance principles underlying the decision and the ombud’s upholding thereof, notably (1) the duty to disclose and (2) the right of the insurer to elect which risks it accepts and which it does not.”
Take-outs from the above
At the heart of all insurance contracts lies the principle of Utmost Good Faith (Uberrima Fides), which states that both parties involved in an insurance contract should act in good faith towards one another.
As with all things legal, there are more than fifty shades of grey.
Of huge interest to me is the phrase “…the underwriting rules for this product”.
I have no qualms with a claim being adjudicated according to the underlying principles and conditions of the policy. That is how it should be.
We have, over the past few years, seen several similar cases where insurers caved in under public pressure.
To what extent are the underwriting rules of the product conveyed to the client? They most certainly form part of the material terms and conditions, which we are legally obliged to convey to assist the client in making an informed decision. Is this possible in a 17-minute discussion, where there is pressure on the agent to conclude the sale? Or is it up to the client to interpret the contract when he receives it?
And what about a client’s interpretation of his specialist’s diagnosis, versus a medical term such as basal cell carcinoma?
In the traditional face-to-face situation, it is likely that disclosure would have been forthcoming, and all relevant medical information obtained to ensure underwriting is done at the application stage, rather than when a claim arises.
But how do you explain this to the public and the media?
Or don’t you?
as an old hand at Insurance ( Short term), many years ago we used to say everything is Insurable, AT A PRICE.
For Old Mutual to say would not have offered the cover had they known about the facts, is the very modern young people’s way of being real softies and rather opt out and more so, out courts supports that, eish??????
For me that disgusting to say the least. And do not come with the argument that you are doing proper underwriting to protect your other consumers- i say again, EVERYTHING is insurable at a price, so that if the circumstances of a certain person are not so good, then keep offering Assurance, although at a higher price that justifies the risk. I am saying the young generation has become too soft to do any business ( or are too lazy to think out the correct premium for a particular risk),
I hate tele underwriting. The client is most likely to forget some information that is material. Why do companies still use it? What about the step – Know your client – in the advice process. It is very important to build a relationship with your client over years and to know his medical history. It is not possible for a callcentre agent to get all the relevant details as needed for underwriting, in a few minutes.
The first step in underwriting is the completion of the relevant medical information by the Broker.
I appreciate your article Paul – well done!
Your 3 questions of teh assurer were most pertinent.
Your conclusion, I fully concur with it.
“In the traditional face-to-face situation, it is likely that disclosure would have been forthcoming, and all relevant medical information obtained to ensure underwriting is done at the application stage, rather than when a claim arises.”
This only seves to highlight the danger of doing business over the phone.
Hi Paul – I’m really “old school” when it comes to the underwriting rules and the interpretation of full disclosure. I think you might have been referring to the case when Momentum caved-in to social media pressure and paid a widow more than R4 million, even after the Ombud had ruled in their favour after their initial (correct) decision to repudiate the claim where there was blatant No-disclosure. In this case, as I’ve always contended (since OutSurance began doing these quick life policies via telephone), there’s a huge case being made for banning the sale of Life Assurance via telephone. However, if the strict disclosure rules are applied by Old Mutual, and they’ve reviewed their decision with full disclosure being made, then they are justified in repudiating the claim – especially if the Ombud upholds their decision – and, whilst our sympathies will be with the widow, it would be another sad case of caving-in by an insurer if they changed their ruling. Bad publicity should NOT influence the basic principles of making underwriting/claims decisions.
Hi.
Even the Dr is to blame…You have cancer or you don’t. Says the person recovering from cancer treatment for two long years with chemo and radiation and now with the consequence of that treatment. To say there is a 15% chance its cancerous does not mean its cancer. I am nearly 20years in the industry and i would have said no under that circumstances. Why does the ombudsman not take the cause & effect into account? Did he die of something similar or cancer…NO…so deduct the right premium from the settlement of force telephone sales people to explain it better. where is TCF?
As a retired CFP practitioner with 37 in the industry, I could not agree more that the selling of risk assurance over the phone should be discontinued. It has the potential for a bad outcome for the public as was so clearly pointed out vin the article. It is incongruous that those in the field, with many years of experience, have to jump through compliance hoops and are at risk if they slip up. Not so the tele-marketer. Reputable Assurance houses should discontinue tele-marketing, but I fear they will not pass up profits, and would rather put out fires if they flare up.
I agree that Momentum erred in not sticking to their guns. Probably the loss in profit could have exceeded the R4m if they had not caved?
I agree with Tony. Perhaps Old Mutual need to ask a broader question regarding previous medical treatment with
An emphasis of mentioning any little thing or occurrence along with the warning that failure to do so could lead to claims not being paid.