ConsumerTalk with Wendy Knowler

Here's how material non-disclosure affects life insurance claims

Disputed insurance claims have been a hot topic recently, following the saga involving Momentum.

Momentum announced last week that it will pay out a death benefit (not exceeding R3 million) for all clients killed in a violent crime, regardless of their prior medical history.

The provider decided to pay R2.4 million life insurance policy to a Durban widow whose husband was gunned down in a hijacking, after a great deal of public outcry.

The company had initially come under fire for refusing to pay the sum claiming the victim, who died in a hail of bullets, failed to disclose that he had suffered high blood sugar levels.

Read: Life insurance 101: Mention every detail of your medical history - consumer guru

Consumer journalist Wendy Knowler explains that material medical non-disclosure can jeopardise an insurance claim.

An insurance policy can be cancelled on the basis of material non-disclosure only if the undisclosed medical condition or diagnosis would have stopped the insurer from granting the policy in the first place.

In other cases of non-disclosure, the insurance firm must reconstruct the policy taking into account the increased risk profile and higher premium in order to determine what to pay in the insurance claim, Knowler says.

Also read: Momentum to pay all violent crime claims, regardless of previous medical history

Knowler says life insurance companies should investigate a client's medical history when a policy is taken out instead of when the beneficiaries make a claim.

Meanwhile, financial advisor Martin Godfrey says insurance brokers need to be more thorough with their questions.

They discuss the life insurance industry's rights to reject a claim, the Momentum saga and examine another case study.

Material non-disclosure means that a reasonable person should have known that that [information] was material to the policy they were applying for.

Wendy Knowler, consumer journalist

The cause of death, in terms of South African insurance regulations, is not relative or applicable when you don't disclose something.

Martin Godfrey, financial advisor

By not disclosing, he lied. Whether it was intentional or not is not the answer and not the question.

Martin Godfrey, financial advisor

The insurer needs to know everything they can.

Martin Godfrey, financial advisor

Listen to the entire ConsumerTalk discussion during The Pippa Hudson Show:

Every Wednesday, on The Pippa Hudson Show, Wendy Knowler provides useful insights and tips on how to make the most of your buying power.

For more stories visit the ConsumerTalk feature page.

Got a consumer case you need help resolving?

Email: consumer@knowler.co.za, put Cape Talk in the subject line, followed by the issue e.g. cellphone contract dispute.


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