The Great Insurance Hoax

I am pleased to include this Guest Blog Post by Chris Hargreaves who can be found on Twitter @scotprovsaysno. It is a long post but it’s all relevant and there is some really important advice here. If you take out any insurance you should read! Please also share with friends and colleagues we need to get the message out to stop these big organisations taking our money!

We are told time and again to be proactive and to insure against all sorts of disasters from insuring our home, cars, pets, to ourselves. The UK insurance industry along with banks tries to get us to buy a wide range of protection insurance from PPI to life, critical illness and income protection. As we know, especially the banks who sold PPI at record rates sticking in on loans and products even without the customer knowing which led to the PPI scandal which is costing the industry billions of pounds a year.

So has the industry learnt a valuable lesson? NO it has not. The industry says their biggest problem in getting people to take out protection insurance is cost but when you talk to the public their number one concern is trust. What’s the point of paying for these policies? These policies never pay out anyway? To be fair the pay outs on protection policies has risen from the 80% mark to around 90% with Friendly Insurers paying out around the 98% mark with £6million a day paid out in claims. Here’s the sceptic in me… If you have 100,000 claims that means 10,000 people can be faced with a refused claim and if the industry never tells you how much in premiums it’s taking on a daily basis how can you come to a fair conclusion? So what happens when you take out a policy in good faith and your claim is refused? This:

In 2009 I was hospitalised with severe internal bleeding and a HB of 5 where I spent the next three months in three hospitals being treated like a lab rat. To cut a very long story short I was operated on without sedation, got a large PE on my lung due to being bedbound for so long, told incorrectly I had bowel cancer and epilepsy (treated for both) and put on enough powerful medication that you could have brought down an elephant. I suffered horrific withdrawals on discharge and because I was sent home without a life saving injection was admitted again in an emergency situation only 48hrs later. My next four months was spent at hospital 3 days a week as they fought to control the internal bleeding which was being made worse by the treatment for the clot which resulted in my blood being made thinner which in turn made me bleed more. Finally after blacking out in January 2010 I was seen by another specialist who stopped the clot treatment and finally I could have an operation to help stop the bleeding. The bleeding slowed but I was still quite ill and with the added stress of being unable work along with my wife losing her job due to the recession we had to live on £62.50 JSW along with food and essentials being bought by our families. I like to think I was prudent in taking out protection insurance and we started our claim against insurance giant Scottish Provident in September 2009 as I was too ill to start it whilst in hospital and as you can imagine we had other things on our minds. I had been sold what is called a “task based” protection policy which meant I had to be unable to do a set number of tasks to get a pay out. These tasks range from 6-8 and you have to be unable to do between 2-3 to get a pay out but consist mainly of; can you hold a pen in either hand, can you communicate in a way to be understood, walk 200 metres without stopping or being in serious pain, can you hear in a quiet room and read 16 point print all with the help of others or aids? Some might be thinking these sound very similar to the tests currently being used to see if people should be receiving disability state benefits and you would be correct. These policy definitions were taken from the assessment of benefits years ago and are used by insurers for policyholders they deemed to be “high risk” to insure against the inability to do their own job. If you do any form of manual work, e.g. driving even if it’s just a small percentage of your job the chances are you have a “task based” policy or to give its correct name Activities of Daily Living (ADL) or Activities of Daily Working (ADW).So in December 2009 Scottish Provident refused my claim because they said I had not experienced any restrictions through my illness or medication even though I was in hospital for three months. We asked to see the reports which left us dumbfounded. The forms were in 3 parts. The first part was about the policyholder, second was looking for non disclosure and if I had caused my illness with the last part asking about my restrictions to six set tasks. Now this is where it got interesting as the form asks for the policyholders current restrictions to the set tasks even though some consultants had not seen me for four months. These consultants said “we presume he has returned to work or not seen from discharge so don’t know current health condition but after this length of time we would say he should have recovered”.

My GP on the other hand knew different and said I was still restricted, having frequent emergency admissions to hospital and did not expect a full recovery until March 2010 as I was also being treated for a blood clot. This was also supported by a private consultant but Scottish Provident said they could ignore this evidence because the consultants in the hospital were more qualified to comment. Back and forth my case went in the internal quagmire of Scottish Provident’s claim handling teams so we went to the Financial Ombudsman Service. A lovely lady helped us through and I told her the evidence was wrong so she suggested we got the correct evidence and then send it to her. We thought this would be easy but the NHS put up brick wall after brick wall as they knew they had totally mishandled my care. It took us to make an official complaint against both Trusts and a face to face meeting before we got the evidence we needed as their approach was that it was not in their interests to comment. Armed with new evidence we went back to the FOS only to be told they could not use this evidence as it was not available to Scottish Provident when they refused my claim even though the new evidence supported my claim in full. They returned my claim to the insurer and asked them to assess my claim again based on the new supporting evidence but Scottish Provident just kept refusing my claim.

On the verge of giving up, we went public and wrote to every newspaper and organisation we could think of in the UK without reply so kept writing to them (over 1000 emails over 2.5 years) until The Times Newspaper chief consumer troubleshooter got in touch. The Times ran our story and also featured another couple let down by Scottish Provident with the same policy. This followed by us setting up a Twitter account aptly named @scotprovsaysno which attracted some interest from within the industry. It quickly turned out one leading light within the industry had been raising the issue surrounding these policies for some years without success so how were two outsiders going to make a difference? We just kept on tweeting and soon we had several thousand followers peaking at 13,000 which led to The FTAdviser, Cover Magazine, The Mail on Sunday, The Protection Review, Which?, The Telegraph, AOL Money, Money Marketing and other publications getting behind our campaign. With this added confidence we were in the right we went back to The FOS and won what the media describe as a high profile case against Activities of Daily Living protection policies. But, there is always a “but”. Scottish Provident appealed the decision twice meaning our case went all the way to the Ombudsman who supported our claim and slammed Scottish Provident for the way they handled my case. We could have walked away at this point but as we had nearly lost everything due to my illness including my business we set about stopping anyone else having to go through what we did. We achieved our first major change when insurance giant Aviva agreed to rewrite 95% of all their new critical illness and income protection away from ADL’S and ADW’s to “Own Occupation” definitions. This was a major turning point as more and more insurers did the same except, you guessed it, Scottish Provident who stuck to the argument it’s better to offer a choice even if it’s a poor choice than no choice at all. In September 2012 BBC consumer program Rip off Britain ran our Angry Policyholder campaign see here  and finally after 3 years Scottish Provident admitted defeat and confirmed it would address these policies in 2013.

In December 2012 earlier than expected Scottish Provident rewrote new policies and offered more occupations for the superior “Own Occupation” definition which means if you cannot do you job the policy pays out. Our story and campaign does not end there as not one insurer who sells ADL/ADW policies has addressed the 800,000 policies that were already in place in the UK before the new changes were made. Now, it’s not as easy as this but if you take 800,000 premiums ranging from £13.00 to £70.00 per month that’s a lot of money insurers are receiving when we all know they are hardly ever going to have to pay out on a claim. Some figures suggest that at least 55% are refused with as little as 10% of claims being paid in full so we need help to keep up the pressure. In Brazil, following consumer pressure the government banned these policies several years ago because hardly any were paying out. So if you have a protection insurance product we cannot stress enough to check if it is “own occupation” and if it is not, you seriously need to consider changing before it is too late.

Friendly Insurers do not sell task based policies and so there are options if your insurers won’t cover your occupation. If the industry wants to raise sales of protection insurance products they need to build trust with consumers. They can start by stopping hiding important clauses in small print, making clear that if a policy is to pay out after 4 weeks to make you aware that it could take 12 weeks to assess your claim and finally be more open and honest about pay out figures and stop hiding behind a top line figure which in itself can hide a lot of bad news. For example 2% of claims are refused on average due to non disclosure, but that sounds like the policyholder has hidden some previous medical condition. In fact, cases we have seen involve an ovarian cancer claim refused due to non disclosure of a previous ear infection and this can be even worse if your policy has been sold on to a closed book insurer where a third party decides your claim not your insurer and these companies DON’T publish their claim statistic.

Chris and Nicola

FB: Facebook Angry Policyholder

Some of the media articles covering our campaign

This Is Money


FT Advisor

The Chauffeur

ME Association

Money AOL