Insurance firms commit to increase life payouts

Thursday, 10 January 2008 12:00

The British insurance industry has committed itself to increase payouts for critical illness, income protection and life insurance.

After criticism over failures to payout on insurance policies, especially on payment protection policies sold without fully understanding a client's medical background, the Association of British Insurers (ABI) has announced more firms will honour policies when medical information has not been disclosed, unless the customer deliberately withheld it.

It is claimed the move will lead to a further fall in the number of declined claims.

However, claims for critical illness, income protection and life insurance will not be paid when customers deliberately withhold medical details.

Stephen Haddrill, the ABI director general, said: "Customers want to know that their insurance claim will always be assessed fairly and paid without fuss.

"The industry wants customers to be able to take out insurance with confidence. Today insurers have signed up to ensuring both of these happen. The number of protection claims that are turned down will fall."

Last year the ABI brought in new rules for protection insurance sold online and over the phone to improve clarity for customers in what policies cover them for and make disclosure of medical conditions easier.

"Protection insurance gives peace of mind to millions of individuals and families in the UK," said Nick Starling, the ABI's director of general insurance and health.

"We want to ensure that people have full confidence in, and understanding of, the products available. Our latest guidance marks another positive step towards this goal."

Under the new ABI rules, where relevant information has unwittingly not been provided, insurers will pay customers a "fair sum", reflecting risk and premiums paid.

In a small number of cases, premiums will be refunded when a policy would not have been sold if the life insurance company had known the full facts.

Nick Telfer, principal consultant for protection insurance at financial research company Defaqto, said: "Over recent years the protection industry has been working hard to improve the customer experience at point of sale. The new ABI guidelines complement this by bringing much needed clarity and consistency to the treatment of cases of non-disclosure.

"These developments are evidence of the protection industry's commitment to the principle of treating customers fairly and should rejuvenate confidence. Hopefully this will start the industry on the road to closing the widely publicised life assurance and income protection gaps."

• Tags:
• income protection insurance
,
• news