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CI Expert: What triggers protection complaints

Looking at the FOS’s published complaints decisions gives a good idea of what causes protection complaints and how the ombudsman views the issues


Advisers who focus on protection are fortunate that relatively few claims arise from this sector. It is the investment market that produces the bulk of non-PPI- related claims.

However, a glance through the ombudsman decisions section of the FOS website indicates that claims management companies are now nosing through this area and quite a few complaints are being upheld. Additionally, there are certain themes that continually rear their heads and it is worth noting the FOS’s reactions and views on these.

Perhaps more pertinently, it sheds light on those areas which generate complaints and where advisers and compliance officers need to be particularly alert.

TPD minefield

The standout among the claims relates to total permanent disability.

TPD is a minefield within the critical-illness arena and it is very easy to see why a planholder may become dismayed when their claim under TPD is rejected.

Higher-risk occupations are restricted to activities of daily living or of daily work, where the claims requirement is much harsher than that of being unable to undertake the material duties of one’s own occupation.

Successfully claiming under an ADL requires the planholder to be very seriously disabled or incapacitated and it is therefore no surprise that more claims are declined than paid.

Two recent cases published by the FOS relate to HSBC declining TPD claims which required the claimant to be unable independently to perform three of five named activities – washing, dressing, feeding, toileting and transferring from bed to chair, and so on. 

One claimant was limited in her ability to perform these activities but unable to complete only one of them so this was insufficient to trigger a successful claim. The FOS concluded that the claim requirements had not been met and rejected the claim.

The second case was very similar with the planholder experiencing great difficulty in performing the tasks but not being totally incapable. The FOS concluded that although she was unable to return to work, she had not met the requirements of the claim wording.

Another recent case involved Aviva declining a TPD claim where the test entailed performing three of six activities. The FOS concluded that various adaptations would enable the planholder to perform the various tasks and also that the medical professionals had alluded to treatments aimed at alleviating his symptoms.

Activity-based wording

A fourth case involved Royal London rejecting an own-occupation TPD claim relating to chronic fatigue syndrome. The issue revolved around being able to perform the “material and substantial details” of the claimant’s occupation. Based on information from the medical specialists, the FOS determined that the complaint should be upheld.

These complaints typify the major hurdles that activity-based wordings produce and provoke the question of their relevance. No figures have been published but it is not inconceivable that a large number of these claims fail due to the harsh criteria employed.

Any adviser contemplating using an activity-based definition should consider the above points very carefully and, if still willing to go ahead, ensure that the client fully understands the precise requirements and issues involved in claiming.

Another recent case centred on Legal & General’s declinature in respect of a stand-alone CI policy.

The policyholder died 14 days after being diagnosed with a brain tumour but the policy clearly stated a 28-day survival period. The policyholder had a separate life policy with L&G which the insurer paid out on. 

The FOS upheld the complaint, with its rationale being that although the policyholder died within the 28-day period, the cause of death was not connected to the brain tumour, therefore had he not died he would likely have survived to the end of the 28 days. 

The ombudsman stated: “I also consider that the 28-day limit has no particular significance, even though I accept it is usual in the insurance industry.”

This decision contains worrying portents for the industry but it also focuses on the peril of ever recommending a stand-alone CI plan. This is particularly the case given that the cost of including life cover is insignificant.

One final case concerns an angioplasty operation where two stents were placed in the same coronary artery. This failed to meet the policy requirements which insist on various forms of treatment to two coronary arteries each showing 50 per cent narrowing.

The claimant stated that his consultant considered the dual narrowings to be severe but, regardless of this, the FOS agreed that Royal London was correct to reject the claim.  Over 80 per cent of angioplasty interventions are on a single artery and this explains the cost implications of extending cover in this way.

The problem for advisers is that few clients read documentation and most tend to focus on the headline conditions as opposed to the underlying claim requirement. 

Any suitability letter must mention the need for the client to read the plan documentation and also to contact the adviser prior to submitting a claim. 

This could reduce disappointment and also unnecessary declinatures, which feed through to the annual statistics.


Alan Lakey is director of CI Expert

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There is one comment at the moment, we would love to hear your opinion too.

  1. Exasperated Me 28th May 2014 at 1:34 pm

    Plus all the switching and churning sales that the regulator does nothing about.

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