Life assurers ‘must follow the rules’ when paying out claims
If an assurance company pays out a claim without advising you beforehand of the amount to be paid and without establishing that the payment is in “full and final settlement” of the claim, you are entitled to claim an additional amount if you think you have been short-changed.
In a recent case before the Ombudsman for Long-term Insurance, Judge Ron McLaren, Mrs Y claimed on a life policy following the death of the policyholder.
When assessing the claim, the assurer asked for further medical records from Mrs Y, because it had doubts about whether there had been full disclosure of the policyholder’s state of health when the policy was taken out.
Mrs Y was unable to provide the information, and the late policyholder’s doctor refused to provide the assurer with the medical records on the grounds of patient confidentiality.
Without evidence of non-disclosure, the assurer had no option but to pay the claim.
Mrs Y then claimed interest on the payout amount. She said that because of the delay, she had run up debt, which had incurred interest. The assurer responded that the payment had been in full and final settlement and refused to consider interest.
In his determination on the matter, the ombudsman says: “An assurer is, of course, entitled to assess the claim by investigating it. If the assurer then wishes to raise a defence to the claim, it has to provide the necessary evidence. Therefore, if the assurer wishes to rely on a pre-existing exclusion clause or on non-disclosure, it has the onus to prove such a defence.
“Although the assurer stated that the claim was paid in full and final settlement, it did not have the complainant’s agreement to this effect. The assurer may have paid the claim with that intention, but the complainant did not receive it as such. In terms of our practice, interest has to be paid on the late payment of a claim.
“Our office accordingly determined that interest [on the amount] should be paid to the complainant,” the ombudsman says.