The ABI has recently issued guidance on the payment of claims under Critical Illness, Income Protection and life insurance policies where medical information was not disclosed during the application process.
The guidance applies immediately, including to all claims in the pipeline. It sets out three levels of non-disclosure and their associated payment outcomes. For example, where the non-disclosure is negligent but not deliberate, the insurer should apply a proportionate remedy. This is established by assessing how the application would have been dealt with if the information had been disclosed. This assessment may result in the payment of a fair proportion of the claim based on premiums paid and the risk. The ABI state this will lead to a fall in the number of declined claims. A copy of the full guidance note is available here.
The English and Scottish Law Commissions have looked at similar issues in their review of Insurance Contract Law Reform. Click here for more information on Insurance Contract Law Reform.