Some reviewable whole-of-life product literature does not make clear that the premium is not fixed for the term and could change, says insurance ombudsman Reidy Flynn.
Speaking at the Developing Next Generation Protection & Health Insurance Products conference organised by Marketing Week in London last week, Flynn said she was shocked when one insurer tried to argue that clients should have understood that the premium was reviewable because the words “initial premium” were next to the monthly cost.
Flynn also criticised protection providers which refused to reinstate policies which had been maintained for over a decade merely because one premium payment was missed by more than 30 days.
She told delegates that few policyholders understand there could be no cover under a policy for any condition that is deemed to be chronic and said she herself often fails to understand the difference between acute and chronic conditions because the definitions are so convoluted.
Flynn said the majority of protection and health complaints received by the Financial Ombudsman Service relate to non-disclosure of material information, such as whether the customer is a smoker.
She added that the number of claims relating to critical illness cover increase each year.
Flynn said: “I think that the industry needs to take considerably more care to tell policyholders that, if any premium is unpaid, no matter how long the policy has been in force, the policy will be treated as void and reinstatement will only be offered to those in good health.
“People do not understand that even a small mistake may mean that the claim will be rejected and the policy treated as void, probably at a time in their lives when they are facing serious difficulties. Insurers should not only emphasise the good points but also the serious duties resting on their customers.”