Leading life and pensions mutual insurer LV= addresses the issue of insurance misrepresentation in its latest Fuel for Life report. The report highlights how support from advisers during the application stage can lead to fewer declined protection claims and better outcomes for clients.
In 2023, LV= paid out 94% of protection claims. Out of the 6% that weren’t paid, three out of four had to be declined due to misrepresentation.
Protection can be a lifeline in cases of valid claims, but when information has been misrepresented at the application stage, insurers often have to decline claims. Different types of misrepresentation include innocent misrepresentation (when a client doesn’t disclose relevant information because they were not aware of it), careless misrepresentation (when a client leaves out relevant information because they either forgot or didn’t think it was relevant), and deliberate or reckless misrepresentation (when a client deliberately chooses not to disclose relevant information).
LV=’s Wealth and Wellbeing Research Programme found that clients had misconceptions about the claims process and why a claim may be declined. This could impact their ability to answer underwriting questions correctly and may lead to deliberate misrepresentation. While the data shows that a rejected claim is the exception, not the rule, 56% of respondents said they think insurers don’t want to pay claims. Additionally, 15% of UK consumers said they would never feel comfortable disclosing their health conditions when answering protection insurance questions.
The research also found that over a third (36%) of UK adults are living with a long-term physical or mental health condition, but nearly a fifth (18%) worry, when taking out a policy, that their claims would not be paid due to the ‘small print’.
Mike Farrell, protection sales and marketing director at LV=, said, “At LV=, we want to be there for all our customers to offer crucial support during life events. 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.
“The latest issue of LV= Fuel for Life examines how advisers can help clients in answering underwriting questions accurately with real examples of misrepresentation and declined claims. 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.”
