Protection or rejection

Thursday 3 May 2007

Insurance is designed to protect us, but complicated policy definitions and exclusions in the small print mean it isn’t always as reliable as people think, warns which.co.uk today.

People who fail to tell their insurer about a past health problem – even something as minor as a visit to the doctor about a headache a couple of years earlier – could have their insurance claim turned down.*

One in five critical illness insurance (CII) claims was rejected in 2005 for failure to disclose health issues or because the illness claimed for wasn’t covered by the policy – but with complex medical definitions it can be almost impossible to know what is covered**.

Payment protection insurance (PPI) should pay out when people are unable to work, but often excludes two main causes of absence from work - back pain and stress-related illnesses. It has a particularly poor record for successful claims – in 2005, the amount paid in claims was only 20 per cent of premiums paid***.

People buying travel insurance should also check the small print – as well as exclusions for existing health problems, there can be strict time limits on reporting lost or stolen items which can make it very difficult to claim successfully.****

which.co.uk also warns against buying expensive, unnecessary insurances such as extended warranties, overdraft cover and identity theft insurance.

Malcolm Coles, Editor, which.co.uk, says:

“It’s easy to assume that if you take out insurance you’re protected if things go wrong, but check the small print carefully and make sure you understand what is and isn’t included before you buy – or you might find it’s worthless.”

Notes to editors

A full article “Protection or rejection” is posted on which.co.uk and will appear in the May issue of Which? magazine. The article includes information on payment protection, critical illness and travel insurance, plus case studies and a checklist of things to consider before buying insurance.

For further information, the full article or an interview, contact Nicola Frame.

Footnotes

* The Financial Ombudsman Service says that in 2006 about one third of health-related insurance disputes related to non-disclosure of existing medical conditions.

** For example, which.co.uk found the following exclusion relating to cancers in one policy document: ‘All tumours of the prostate, unless historically classified as having a Gleason score greater than 6 or having progressed to at least TSM classification T2NOMO.’

*** In 2005, the OFT found PPI claims ratios (claims as a percentage of premiums paid by customers), at approximately 20 per cent. By comparison, claims ratios for motor insurance were around 82 per cent.

**** For example, which.co.uk found that some insurers exclude stolen goods ‘which you do not report to the police within 24 hours of discovering and which you do not get a written police report for.’

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