L&G reports 19% drop in critical illness rejection rates

Legal & General has reported 2006 rejection rates for critical illness claims are 19% lower than the previous year.

Claims declined for non-disclosure have reduced by 15% and claims declined for not meeting the policy definitions have dropped by 27%.

L&G paid 92.1m in critical illness claims last year – 11% more than 2005.

Russell Whitworth, claims and underwriting director of L&G, says: We didnt go into the business of critical illness to reject claims and so our latest experience is good for customers and good for the industry as a whole.

It shows that people can have confidence in critical illness cover.

Our claims figures demonstrate that the time and effort that we have invested in our underwriting systems to reduce non-disclosure and improve the clarity of policy definitions is paying off.

We continue to learn about new ways to improve the customer experience.

L&G attributes the rise in payments partly to innovations such as tele-medical interviewing, where underwriters or nurses speak to customers over the phone regarding their medical history.

New product literature also contains help and support for advisers and their clients to help reduce non-disclosure even further.

L&G claims data shows that critical illness claims paid in 2005 were 83m, increasing 11% to 92.1m in 2006.

Over claims declined accounted for 20.6% in 2006, falling to 16.7% in 2006, while claims declined for non-disclosure fell from 14.3% in 2005 to 12.1%.

Claims declined for not meeting policy definition fell from 6.3% in 2005 to 4.6% in 2006.

Cancer , terminal illness, heart attacks, multiple sclerosis and strokes were the most common illnesses claimed for in 2006.

Whitworth adds: We pay all valid claims but the primary reason for declining a claim is non-disclosure.

We are combating this by producing customer and adviser leaflets outlining the potential impact of non-disclosure.

We have clear warnings on relevant key features documents and application forms.

Our underwriting teams also speak to a significant number of customers over the phone regarding their medical history.

This helps increase disclosure levels and therefore gives more certainty of claims payment.

If a customer does not disclose medical history that would have resulted in the application being declined or postponed, claims on such policies will tend to be declined.

The industry should not pay claims on policies where the customer was uninsurable at application, albeit due to non-disclosure of material facts.

Of the claims that L&G declined due to unrelated non-disclosure, 80% of customers had an opportunity to disclose against more than one question at application.