First published in ITIJ 111, April 2010
Covered or not? As Roger St. Pierre discovers, the web is awash with debate over the inadvertent non-declaration of pre-existing conditions on group policies
Like so many other things in this modern digital age, insurance is becoming ever-more complex and, for the buying public, confusing. Henry Ford once famously said: “You can have any colour you like – just as long as it is black” but today’s car buyer is offered so many specification choices and options when placing his or her order that the cars rolling off the production line are, in effect, bespoke.
It’s much the same when it comes to insurance. TV ads continuously brag that this company or that one can offer the cheapest deal, but they keep very quiet on the key matter of what strength and depth of cover is being offered by each insurer – and so varied are the policies that it’s nearly impossible for the consumer to make a true like-for-like comparison between the different offers.
‘Let the buyer beware’ is a long-held mantra of commerce, but consumer organisations now argue that this is simply not good enough in an era when the small print seems to the public to be ever more complicated and, well, smaller. And the web, with all those endless links, makes the whole thing more tedious and likely to be overlooked by the time pressed proposer.
so varied are the policies that it’s nearly impossible for the consumer to make a true like-for-like comparison between the different offers
One area where the public’s growing confusion and the lack of clarity from the insurers have come head to head in producing a major debate is the thorny matter of the requirement for proposers to declare the pre-existing medial conditions of whoever is to be insured.This problem has already been spotlighted in ITIJ by a recent UK case concerning an elderly gentleman who travelled to Turkey on a group travel policy taken out by the group’s leader – a document which the gentleman himself never got to see, let alone read.
The perils of group policies
This February, James McHugo, a sick 78-year old grandfather, was reported to be stranded in a Turkish hospital because the Atlas Direct group travel insurance policy, under which he innocently thought he was fully covered, was refusing to pay out on the grounds, they say, that his pre-existing medical conditions of diabetes and chronic heart problems were not fully declared at the time the group policy was taken out.
Mr McHugo collapsed on arrival at Antalya airport for a vacation and was rushed to the local hospital, suffering not from his pre-existing conditions but from extreme dehydration and the onset of serious pneumonia. After a week of intensive care and another week in recovery, he was moved to a normal ward but was refused a discharge until the hospital’s £20,000 treatment bill was met – a claim for which Atlas immediately rejected.
As ITIJ reported, his daughter, Sharon Mason commented angrily: “We are very worried about his health and mental state. It’s a total nightmare, especially as the hospital is saying they will not release him until the bill is paid.” She continued: “We are not in a position to pay, while he is a pensioner and simply cannot afford it. Now he’s stranded, all because the person who took out the group’s policy inadvertently failed to disclose dad’s pre-existing conditions.”
Key matters like this should surely be given more prominence so nobody fails to grasp their declaration obligations
From looking at the Atlas Direct site, nothing is flagged up at the point of sale, but there are links to another part of the site that tells customers of the implications of non-disclosure. “Yes, it is there, if you dig deep for it, but in today’s busy world most of us skip through the reams and reams of small print without reading it all,” says consumer advice consultant Susan Browning, adding: “Key matters like this should surely be given more prominence so nobody fails to grasp their declaration obligations. This is surely a page-one matter, not something that should be buried away among the website links.” Browning added: “I’m told that plans are afoot to require insurers to flag up the consequences of non-disclosure by individuals purchasing travel insurance, but I wonder if especial emphasis will be placed on the need for those taking out group policies to ascertain the medical status of each insured person and declare any pre-existing conditions to the insurer – something that I’m sure rarely happens at present.”
On its public advice website, the New Zealand Insurance and Savings Ombudsman offers some sage advice to consumers: “Health insurance policies are designed to cover health conditions arising after the commencement of the policy, rather than health conditions existing before that time. Consequently, any pre-existing conditions are generally excluded from cover.” It then continues with its clear warning: “Each policy will contain its own definition for ‘pre-existing condition’. It is important to note that while you might not personally consider that a particular health condition requiring treatment is, in fact, a pre-existing condition, it is what the policy wording defines as a pre-existing condition that counts should a disputed claim arise.”
“In general terms, a pre-existing condition is defined as any health condition of which you were aware or for which you had been receiving treatment or advice at or before commencement of the policy. Importantly, this includes any health condition or conditions for which the insured person has shown symptoms, even if the condition had not been diagnosed.” Continues the NZ Ombudsman’s advice: “When you apply for health insurance, the insurer relies on you to tell it about all pre-existing conditions so that it can decide what terms and conditions it feels able to offer. It might then decide to offer cover for the pre-existing condition, subject to an additional premium; to permanently exclude cover for the condition or to exclude the condition from cover for a set period of time.” One final warning takes the form of: “It is important to accurately disclose all health conditions and symptoms when applying for health insurance. Otherwise, if a claim is made for a pre-existing condition the claim will almost certainly be declined. Since policies exclude cover for pre-existing conditions which the insurer has not been told about and which it has not agreed to cover, it means that a condition that develops after the policy commences will be excluded from claims if they relates to a pre-existing condition.”
The USA’s Federal Long Term Insurance Act, Section 415-D:5 holds that full and fair disclosure is an important matter on both sides. It also requires that no long-term care insurance policy may be cancelled, non-renewed or otherwise terminated on the grounds of the age or determination of the mental or physical health of the insured individual or certificate holder and adds: “No long-term care insurance policy or certificate shall use a definition of pre-existing condition that is more restrictive than the following: ‘Pre-existing condition means a condition for which medical advice or treatment was recommended by or received from a provider of healthcare services, within six months preceding the effective date of coverage of an insured person’.”
The act continues: “The definition of pre-existing condition does not prohibit an insurer from using an application form designed to elicit the complete health history of an applicant and, on the basis of the answers on that application, from underwriting in accordance with that insurer’s established underwriting standards.”
A spokesman for Colorado-based brokers Cook & Associates comments: “HIPAA, The Health Insurance Portability and Accountability Act of 1996, offers protection for individuals who have pre-existing conditions, helping them to keep coverage for those conditions or to get coverage in no more than 12 or 18 months through limits on pre-existing condition exclusions. Further, it helps ensure that individuals are not excluded from coverage under a group health plan – but full disclosure is still critical if declined claims are to be avoided.”
Says Andrew Wilson, sales and development director of UK-based Medibroker Ltd: “There’s always a temptation for non-disclosure, to keep quiet and hope it will not be noticed, but this is not only dishonest but plain stupid as the truth will most likely come out, leading to a claim being denied. Consequently, instead of saving money, the insured will be losing it, big time – and they’ll also be far less likely to get any cover at all in the future.”
The USA’s Federal Long Term Insurance Act, Section 415-D:5 holds that full and fair disclosure is an important matter on both sides
Strictly, whether or not a proposal requires a particular pre-existing condition to be declared or not depends on the type of questions that are asked on the insurance application. Wilson said: “Some applications ask whether or not the proposer has ever been diagnosed with or treated for a particular set of health conditions while others ask whether the diagnosis or treatment has occurred within a specific time period, such as the last 10 years. We always advise full declaration, even if specific questions are not asked.”
The industry currently offers two modes of underwriting. Full medical underwriting sets out with crystal clarity just what is and is not covered, a factor that leads to faster claims’ processing, fewer disputed claims, easy transfer with continuous cover, and greater flexibility. Moratorium underwriting provides a simpler application process, with no medical questions asked. It’s a simpler, faster process and involves no premium loadings for medical history and no permanent exclusions of all pre-existing conditions.
“However,” comments Andrew Wilson, “the industry needs to do a better job of making the buying public aware that the policy will not cover pre-existing conditions unless certain specifications are met. Usually, the insurer will not cover medical conditions that have existed for the past number of years. This requires that a waiting period must elapse before claims for pre-existing conditions become eligible for cover.” He added: “In these cases, the insured person needs to be clear of all symptoms and treatment for long enough to satisfy the moratorium and become eligible. Conditions that need regular ongoing or even occasional treatment, medication, tests or advice may never be eligible for this delayed cover.”
Argues Susan Browning: “There’s a moral duty incumbent on the insurance industry to ensure their customers are fully aware of their duties of disclosure. These requirements are, of course, fully justifiable – but only if the customer is made aware of them.
“As the old saying goes, it’s not good enough for justice simply to be done, it has to be seen to be done, and the plight of Mr McHugo and others who have been caught out through innocent non-observance of their duty of declaration of pre-existing health symptoms and conditions does the travel insurance industry great damage in PR terms.”
This affair, and others like it, just emphasise how important it is for insurance companies to create easily understandable proposal documents and websites.”
Web chat sites have been steaming with anger over Mr McHugh’s plight. Comments blogger Harry O’Caine, from Tipperary: “I would not advise anyone to use a click and buy insurance provider. Go instead to a proper insurance broker with all your details and your full medical history and let them sort it out. It may cost a little more but the clauses are clear so, in actual fact, you will be saving money in the long run.”
Sums up Andrew Wilson: “This affair, and others like it, just emphasise how important it is for insurance companies to create easily understandable proposal documents and websites.”