He dies in a hail of bullets during a hijacking and Momentum declines to pay the life cover claim on the grounds of non-disclosure of his high blood sugar levels. Momentum has now changed its position and will be honouring the claim. This raises serious and justified concerns on the part of all of us. I am sure there are many people with life cover who are wondering if their life cover would pay when they die or if their families will be left destitute. One thing I will ask Momentum customers and other concerned people is this; do NOT cancel your policy until you have been granted another one as you could be putting your family at risk
What happened in this Momentum case?
This is the process of risk rating you as a customer before approving or declining your life cover. The process entails questions around your health e.g. Do you know your HIV status? Do you smoke? Are you on any medication, Have you been to the doctor in the recent past?, etc…. There could also be blood tests to check your HIV status, other medical conditions, etc… and you might even be asked to produce medical records from you r doctor. The end result of this underwriting process is that your application for life cover would be Accepted or Declined or Loaded, this means you would pay a higher premium if you have an illness or Approved with exclusion of pre-existing conditions, etc…
The most important question that each one of us should ask before we take life cover is the following;
Does the insurance company underwrite
- At the time of application? or
- Throughout the life of the policy? or
- At claims stage?
Underwriting at application stage
Insurance companies that underwrite at application phase will ask you a lot of questions at the time of application. You must answer truthfully and depending on how you answer the questions, they will do further tests e.g. blood tests that check HIV and other medical conditions, they will ask your doctor for existing medical reports & disease management reports where applicable, they will ask you to go to a doctor for further medical tests, they will check with other insurance companies for any medical reports, etc… It is a long and onerous process and can be frustrating. But as I often explain to my customers, it is better for them to go through the process now when they are alive than to go and take insurance with a company that will NOT ask too many questions and then later on when they are dead, they refuse to pay on the grounds of something they could have uncovered at application phase.
Underwriting throughout the life of your policy
If your insurance company asks you to inform them whenever you travel overseas or to other countries in the continent, or if you change jobs, if you fall sick, if you start smoking, etc… then it means that they are underwriting throughout the life of the policy. So if you take your policy while you are young and healthy and later on you have an illness, they will underwrite at that stage and in all likelihood increase your premiums. You are also at risk of forgetting to inform them when you travel or change your lifestyle materially so this would put you in trouble. Another challenge with continuous underwriting is that your financial advisor might forget to let you know that you would be underwritten throughout the life of the policy and what the consequences of that would be. Personally, I do not prefer such policies because I don’t know if I will suffer from a critical illness later on in life and if I do, I don’t want to end up without cover or with reduced cover or unaffordable cover. I am busy assisting a customer right now who has a critical illness. She had life cover with an insurance company that underwrites throughout the life of the policy and when she got ill, they paid her out for critical illness and stopped her life cover.
Underwriting at claims stage
Other insurance companies will dig out your medical history when you are dead and if they find something that you did not disclose then they will refuse to pay. One could argue that they are looking for reasons NOT to pay the claim especially if the cause of death has nothing to do with the illness. I feel that this is trapping the customers and that the Long Term Insurance Act must be changed to forbid insurance companies from underwriting at claim stage. Some disease such as diabetes are silent killers and you might have it and not know that you have it. A customer could therefore innocently answer that they don’t have a condition simply because they are not sure. HIV is also another case in point because some people do not do tests and they do not know whether they are HIV positive or not.
So if you have life cover and you do not know which of the above life cover it is, find out from your financial advisor. In fact, this is the time for all insurance companies that offer life cover to come out clean and inform the market of their underwriting practices and the consequences thereof because as it is, many people do not trust the industry because of such cases as the Ganas case. None of us can afford to have life cover if in the end, we face a risk of the life cover policy NOT paying out. Ganas was lucky but I am certain there are many more people like her who are suffering because the insurance company refused to pay the claim.