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The new Consumer Insurance Act puts onus on insurers for specific information which could be used before refusing claims

Date: (26 April 2013)    |    

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The family of a man who died of cancer but whose life insurance payout was refused on the grounds that he failed to disclose pins and needles have won their fight against Friends Life, after the financial ombudsman ruled that the insurer was wrong to cancel his policy.
Nic Hughes, 44, a graphic designer and lecturer, died last October from cancer of the gallbladder leaving his wife Susannah Hancock and eight years old twins.
Just before his death he had learned that the company had cancelled his critical illness and life insurance policy, arguing that he had failed to disclose other symptoms which would not have given him cover.
Hughes had declared that he suffered from ulcerative colitis when applying for the policy, but Friends Life said he had not admitted to suffering from pins and needles, or being asked to reduce his alcohol intake by his doctor – symptoms which his doctors said were unrelated to the cancer.
Hancock successfully appealed to the financial ombudsman who ruled that the policy should not have been cancelled, and Friends Life also agreed to pay the £100,000 claim in full, plus interest.
Though the firm said Mr Hughes had not disclosed some things at the time of the application the ombudsman said in a letter to Hancock that it accepts that any non-disclosure was not deliberate or relevant to the claim he later made and as such the firm was not entitled to rely on any such non disclosure clause and it should have paid the critical illness claim when it was submitted.
Kester Brewin, a friend of Hughes who had led the campaign, said the decision was life changing for the family and a huge vindication of Nic as a person. He said Nic died of cancer struggling with the insurance company and getting depressed when he should have been spending time with his family.
In a statement, Friends Life said they would abide by the decision and though having reservations about the case they were sympathetic to the circumstances of Mr Hughes family.
It would therefore be paying the claim in full, plus interest, in addition to an ex gratia payment already made, the statement said.
The new Consumer Insurance Act, which came into force earlier this month, requires insurers to ask specific questions about any information that they could use to decline a claim, rather than leaving it to consumers to volunteer potentially unrelated details.