Let’s take an example.
A few months back, a young person approached us in need of assistance; they were highly distressed due to the denial of their claim. They had acquired an insurance plan from a relative’s agent. When they initially bought the policy, they informed the agent of having been diagnosed with throat cancer a while ago. Fortunately, the treatment proved fruitful, and they were totally in remission.
He was initially reluctant about getting a comprehensive policy due to the stigma surrounding cancer, but was relieved when the agent reassured him that he could do so without any problems.
He had been holding the policy for five years, and we had paid around Rs 86,000 in premiums, a sizable amount. These were the facts of the matter. Initially, it seemed to us that there was no reason why the insurer would not pay out his claim. But then he agreed that they denied the claim owing to his pre-existing condition being undetected when he first applied. Thus, they turned it down, citing his failure to reveal medical records.
Yes, this certainly should clear things up. The issue here is a lack of disclosure and it’s a done deal. Insurance companies have no obligation to cover customers who are not honest in their dealings.
We were on the verge of revealing the truth when he spoke out again, this time with a much harsher tone. He said he had actually told the agent about his condition, but it was absent from his policy document and he couldn’t understand why. Then, we intuitively understood what had happened.
Humans can be quite rigid, but throw something that has incentive their way, and see how flexible they become. This is one of the reasons why the insurance industry is so heavily reliant on an intense incentive scheme. It’s a product which people aren’t normally eager to purchase, hence the hefty commission pay-outs for agents that secure a sale.
Such incentives can at times become corrupt though, pushing individuals to carry out some awful acts.
The agent had used a shady trick. Everybody in the business knows that cancer patients aren’t eligible for health care insurance, even when they are disease-free. Attempts to raise premiums don’t pay off, as insurers will still be bearing a considerable amount of risk. It may sound unbelievable, but this is common knowledge among seasoned industry players and agents alike.
You’d think that agents would be honest when they distribute information. Unfortunately, that doesn’t always happen. Some will try to persuade you and avoid mentioning any issues to make the sale.
This could backfire on them if the insurer finds out, but there’s a high chance they will not. The result of this is that once the policy is issued, they’re likely to get a big reward until it’s revealed they have been dishonest.
It appears that this agent chose to keep the customer in the dark about their pre-existing cancer, most likely for financial gain. Insurance companies usually contact customers and review any information about existing conditions before issuing a policy, but if it isn’t declared, the policy may go through without complication.
In some cases, agents may even advise against divulging this kind of personal information – especially if they’re a family friend – as was evidently the case here.
When customers push for a discount, agents often resort to the age-premium trick. In order to make it appear as an attractive option, they alter the customer’s age on the application form.
Lowering it by 10 years cuts down premiums substantially which looks like a bargain, but in reality, it’s just fraudulent activity. It may seem like an honest blunder, but it is done deliberately.
It is essential that you always verify the application. If it’s online, you must double-check it or else ask a sales executive to fill it in for you. Offline applications should be inspected thoroughly as there could still be errors even after such care.
Set aside some time to review the application, particularly if something seems wrong. You should also contact the insurance provider directly if you have any doubts. However, never take anyone at their word entirely – they may not have your best interests at heart.