A trio of letters within a short span of time were sent to the press recently, and they caught our attention. They were about insurance claims being rejected, so naturally it touches a sore spot of those who ever had trouble claiming from their policies.
But a letter that makes it to the press does not necessarily make it factually right – but our aim of dissecting these letters is to bring home an important point about Life Insurance (even insurance, in general):
Declare well, Declare first. You will thank yourself later.
We present excerpts of each letter chronologically and insert our comments accordingly.
Letter 1: Unfair to reject claims due to past medical conditions
Insurers should conduct 100% background medical checks before accepting any policy. Never mind how it is going to be done, just do it.
Written by Tan Kin Lian. Of Course.
The people’s champion wrote in to lament the fact that insurers were rejecting claims unfairly. But the irony does not escape us: He ran one of the largest insurers in Singapore for a number of years, during which he must have saw his fair share of rejected claims. Strange that he is fighting for that cause now.
As president of the Financial Services Consumer Association, I have been approached on several occasions by consumers who had bought integrated Shield plans and gone for expensive treatment in private hospitals.
Prior to admission, they checked with their insurance agent and were assured that the treatments would be covered under the integrated plans.
However, their medical bills were subsequently rejected by the insurance companies.
Not siding with any one here, but the agents could be only looking out for the ward classification and if the plan covers it. Eg. Does it cover Private Hospital treatments? The implicit assumption here would be that the plan was incepted on an iron-clad basis – i.e. all medical and health conditions were declared BEFORE buying the plan.
When processing the claim, the claims officer checked the medical history of the insured and found some conditions that had not been declared when the insured applied to upgrade to the integrated plan or to reinstate the cover after it had lapsed due to oversight in premium payments.
In some cases, the insured was not aware of the past medical condition or the need to declare it in the application.
The alleged non-declaration was, nevertheless, used as the reason to reject the claim.
2 points here:
Yes, insurers conduct detailed checks only before they are about to pay a claim. This is a matter of practicality, to keep costs down.
Second point: Ignorance is not treated as a valid reason to pay out the claim. (Try the ignorance plea infront of a judge, if you disagree with this)
If there had been no clinical initiations (such as medical appointments made to see a specialist), then the policy holder is right to say that he or she was not aware. But once such appointments are made, then ignorance is no longer valid. We explore this in greater detail in the next letter.
The practice of rejecting claims due to alleged non-declaration is unfair to consumers.
There is always evidence before rejecting the claim. Insurers, unlike Tan Kin Lian, work with within reason.
These medical bills are usually of large sums, involving several tens of thousands of dollars. If the insured person knew that the cover would be rejected, he would probably have opted for subsidised treatment, which would be covered under the basic MediShield plan.
I ask the Monetary Authority of Singapore to require insurance companies to check an applicant’s medical history at the time of processing the application for upgrading or reinstatement.
If they are not satisfied with the medical status of the applicant, they should reject the application at that time.
If the insurer accepts the application, it should be barred from rejecting a claim on the grounds of non-disclosure of past medical conditions.
Well it does seem quite reasonable, on the surface. But here’s a cute little question to disperse the crowds: Who’s gonna pay for the checks?
Ultimately, it would be the consumer. Checks cost money. Yeah the insurer might have to foot the bill first, but revised prices would reflect the costs of those checks.
Examining the history of Tan Kin Lian, it is not too difficult to see why he would be the kind of person to shoot off this type of letter. We all need a champion that failed in a bid to be president, right?
This then spawned a letter by a policy holder who was rejected for a claim, echoing Mr Tan’s sentiments.
Letter 2: Don’t Penalize Customer for Insurance Agent’s Failing
Written by: Shelby Doshi (Ms)
Among the millions of dollars of claims paid out yearly, there will be a fraction of them that are rejected. We know, because we’ve covered one such example before.
The usual process to being rejected for a claim would be:
1. Disbelief (Hey, I pay my premiums! You are my insurer! Pay me, dammit!)
2. Denial (What do you mean I didn’t declare properly? No one told me this was important)
3. Finger-Pointing (Its not my fault, my agent told me otherwise! He represents your company, so you should honor the claim)
Thus begins Ms Doshi’s story.
I had upgraded my integrated plan to cover private hospitalisation and my then agent told me to fill up a form. However, I was not told by the agent that I had to fill in the portion of declaring medical conditions, as it was merely an upgrade and I had been holding the existing plan for many years.
This is unlikely. When you upgrade your plan, it means a greater risk for the insurer. So as a rational business entity, it would conduct additional checks. i.e. Ask for declaration. If there is a reduction of risk, then there is a chance that no additional declaration is needed. You can take this to the bank.
The plan could not have been accepted without a re declaration of medical conditions, and it is her word against the company. (Willing to bet there would be proper documentation done too)
But several months later, when I tried to make a claim after a day surgery at Raffles Hospital, my claim was rejected.
The insurance company said I had not declared that I had been referred by the polyclinic to Singapore General Hospital (SGH) for other medical appointments.
My argument to them was that I was given several referral appointments to SGH, but was not officially diagnosed with anything, so how can that be declared as a medical condition?
Here is the train of thought of the claims officers. There won’t be a fire without smoke, to quote a chinese saying. Even though there were no official diagnosis, there must have been a reason why the referrals were made in the first place. This is presumably to a specialist clinic within SGH, not your local GP.
Within the proposal forms, there would be a section asking specifically for this type of scenario.
I informed them that I was unaware I had to declare my referrals, since it was an upgrade and not a new policy application, and it wasn’t made known to me by the agent who was with me when I filled the form.
I followed up by filing a complaint against the agent, but my claim was still rejected.
I ended up paying cash for the medical treatment at Raffles Hospital.
There are many agents, full time or part time, selling insurance. You can’t be assured that they will always give the right information, but the customer should not be penalised for it.
Again, ignorance is not a valid reason. It is unfortunate when claims are rejected, but it happens. One thing we agree with, is that you cannot be assured that agents will give the right information. And ultimately you, as the policy holder will be at the receiving end (unless there is a fraudulent act).
What’s the best solution? Keep well informed, and always read the print.
So of course, the Life Insurance Association of Singapore would be known as the Life Insurance Association of Singapore if they kept mum about the issue. So its off to the press yet again.
Letter 3: Insurance Claims – Customers must come clean about medical conditions
We Life Insurance folk have been following a set of rules that have kept us going, and these rules won’t be changed anytime soon. We need to protect all policy holders, not just some of them.
Written by: Pauline Lim (Ms)
Of course it takes an Executive Director of LIA to provide a response!
An insurance policy is a legally binding contract based on utmost good faith on the part of the applicant
Insurers will not unreasonably reject a claim or treat a policy as if it had never been issued unless the applicant did not provide “material” information.
Section 25(5) of the Insurance Act states that “no Singapore insurer shall use, in the course of carrying on insurance business in Singapore, a form of proposal which does not have prominently displayed therein a warning that if a proposer does not fully and faithfully give the facts as he knows them or ought to know them, he may receive nothing from the policy”.
Supposing claims made by policyholders who had chosen not to disclose their medical condition or health status in their applications are paid, it means that the other policyholders end up paying higher premiums in the future.
Ah ah! Someone’s bringing out the law! And the law says, please hor, state the warning big big. As big as possible, please. Here is one such example (Screen grab from FWD)
Even things like check ups and tests have to be declared.
The point in all this, is to make sure that adverse selection (ie. people who are more likely to claim that others) will not be a burden to the majority. That is why pre-existing conditions are sometimes excluded, or attract a loading from the insurer (a higher premium than average).
Insurers assess applications before granting cover.
If nothing is disclosed, there is no basis for the insurer to carry out further checks.
The application will be underwritten based on the declarations (including “nothing to declare”) made in the form.
Applicants with declared medical conditions will be told of what is not claimable (that is, excluded) under their policy.
Insurers owe a duty to all policyholders to ensure fairness and equity.
Hence, insurers check for material non-disclosure before paying claims.
We covered this earlier, it is a cost consideration.
Pre-existing conditions are covered by the MediShield Life component of Integrated Shield Plans but are not covered by the private insurance component of Integrated Shield Plans.
If the policyholder says he was not aware of his medical condition existing at the time of application or the need to declare it in the application, the exclusion clause kicks in if his medical records show that he already had signs or symptoms, or had received advice, diagnosis or treatment before commencement of the insurance.
If the applicant fully and faithfully declared his medical history, a claim for the disclosed condition will not be rejected.
If exclusions were imposed on the medical condition declared, then the claim cannot be paid.
So what about Ms Shelby Doshi? Why should the appointments have been declared, even if they eventually amounted to nothing? This is because people won’t be referred to specialist clinics if there was no basis, and that once referred, these same people could just not show up for the appointments and buy insurance first.
They could be medically suspect already (but not necessarily so) – which poses a risk to the rest of the population. What about Medishield Life, you ask? Why can it cover pre-existing conditions?
Simplest answer i can give: It is run by the government, who is probably more altruistic compared to the private insurers.
Regardless of what anyone says, claims, or asserts: You are responsible for what you sign for.
A contract is binding both ways, and in this day and age of widespread education, you cannot claim to be ignorant of what you signed for. Heck, even illiterate folk are responsible for what they signed for, in many cases.
So the key lesson here is: Make sure you declare everything before you sign for a contract, and if in doubt, it is always better to over declare than to under declare.
The interest that you protect, may well be your own.
Declare well, Declare first. Words to live by.
This article reflects the opinion of ClearlySurely.com alone. You may have your own opinions, and we would love to hear about them in the comments section below.
www.ClearlySurely.com aims to eradicate the knowledge gap between consumers and Life Insurance. Our Vision is that one day, every Man, Woman, and Child will be properly insured.
There was also a reply from Tan Kin Lian (making it a 4th letter to the press). We liken it to an un-sharpened pencil: pointless.