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Lifesearch hits out at firms over non-disclosure claims

Lifesearch has accused insurance firms of exaggerating their willingness to pay out a proportion of all unrelated non-disclosure claims, saying that many firms only do so after a fight.

Friends Provident earlier this month said it will pay out a proportion of the benefits on all critical-illness claims where the policyholder has not disclosed information that is unrelated to the claim.

Several insurers, including Legal & General, Prudential, Bright Grey and Royal Liver say this has always been their policy and some have accused Friends of just trying to gain publicity.

But Lifesearch head of protection strategy Kevin Carr says, in his experience, only one unnamed life firm has voluntarily paid out in this case and brokers and policyholders have a fight on their hands to push a claim through.

Financial Ombudsman Service guidelines state that insurers should pay a proportion of all unrelated non-disclosure claims if the misrepresentation was inadvertent rather than reckless or fraudulent.

Carr believes some insurers are putting inadvertent cases into the reckless category to avoid paying out and encourages advisers to query claims declined for recklessness.

He says: “There are a number of insurers that pay a proportion of these claims but the claim-handlers have to really struggle to get them to do it. It is all very well to say we do this behind the scenes but a lot of companies are deciding that these claims are reckless when they are in fact what the FOS defines as inadvertent.”

L&G claims and underwriting director Russell Whitworth says: “We have always paid a proportion of the sum assured under claims where there has been inadvertent non-disclosure.”

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