ASU should be underwritten at the point of sales, writesNigel Payne, managing director, Assurant Intermediary.
Fraudulent claims aside, it has to be assumed that most customers buy insurance in good faith. If claims are denied then it generally implies there has been an issue of non-disclosure. The insurance industry doesn’t tend to publish figures on the number of claims declined because, not surprisingly, it is viewed as competitively sensitive information. However, what can be said is that any rate of claims denied is not good for the perception of the industry.
The insurer relies on the information provided by the customer, or the broker on their behalf, in making its decision about whether to accept the risk and on what terms.
Brokers have four main obligations with regards to disclosure of information when placing or renewing insurance:
* Advise the client of the duty to disclose all material circumstances and explain the consequences of failing to do so.
* Indicate the sort of matters that ought to be disclosed.
* Take reasonable care to elicit details of anything that might need to be disclosed that the client might not think it necessary to mention.
* Be satisfied that the client understands his/her obligations. This will ideally require a written exchange, both at placement and on renewal, although a verbal agreement is acceptable as well.
You cannot rely on the questions asked on the proposal form to provide limits on the information required by the insurer. This is where brokers sometimes fall foul of the law, especially regarding Accident Sickness and Unemployment (ASU) insurance. The questions asked on an ASU proposal form aren’t long or detailed and there is a temptation to sprint through them, but brokers are risking both invalidating the policy for their customers at the point of claim and a potentially hefty claim against their own professional indemnity insurance if their duty of care is brought into question.
The key is communication. Whilst the proposal process for ASU might seem simple, it’s important that brokers spend time carefully exploring the answers with their clients and ensuring they have accurately recorded (in writing) any material information that the customer provides.
Brokers’ protection has eroded over recent years. Never has it been more important that brokers guide customers carefully through the disclosure and record all details, both for the validity of future claims but also for their own professional protection. A denied claim could have an impact on your professional reputation.
This point becomes all the more important if, as a broker, you fill out the proposal form on the customer’s behalf, or, as is increasingly the case, the customer completes the form themselves online. In many cases these days proposal forms don’t require the customer’s signature, making it all the more difficult for brokers to prove that they have followed the non-disclosure process adequately.
A case study published on the financial ombudsman’s website is a clear example of how an incomplete and unsigned proposal form can lead to a denied claim over a breach of the duty of disclosure. The claim in question was denied by the insurers originally because, they claimed, the customer failed to disclose a previous criminal conviction. The box asking for details of “non-motoring convictions (relating to you or any other permanent resident)”” was left blank. The customer maintained that they had verbally told the broker about the convictions but the broker failed to record them. Because the box had been left blank there was no evidence that the broker had asked about the convictions during their meeting.
