Insurance Company Refuses to Pay Out on Policy Despite Life Insurer's Own Rules

Strategic Insights -

Linda Doig, a housewife from Tayside, Scotland, is facing financial ruin after her husband Bill's death from a heart attack last August. Despite having two endowment mortgage policies with Guardian Royal Exchange, now known as Guardian, the company has refused to pay out the £28,000 policy value. The policies, taken out in 1991 and 1992, included life insurance that should have covered the mortgage when Bill died.

Guardian claims that Linda's husband failed to disclose material facts on his endowment application forms, specifically a history of depression for which he was prescribed medication. However, the doctor who prescribed the medication has stated that Bill did not suffer from a psychiatric illness. Regardless, Guardian has offered Linda an ex-gratia payment of £15,000, but maintains it has no legal obligation to pay anything.

The case is one of hundreds brought to light by The Sunday Times, which has revealed that insurance companies are clamping down on claims in an effort to boost profits. Moreover, it has been reported that the bosses of some of the country's biggest insurers were awarded pay rises of up to 50% last year, 25 times the rate of inflation.

Key Takeaways:

  • Guardian Royal Exchange has refused to pay out on a £28,000 policy despite the policyholder's husband dying from a heart attack last August.
  • The company claims the policyholder failed to disclose material facts on his endowment application forms, specifically a history of depression.
  • The doctor who prescribed the medication stated that the policyholder did not suffer from a psychiatric illness.
  • Guardian has offered an ex-gratia payment of £15,000, but maintains it has no legal obligation to pay anything.
  • The case is one of hundreds brought to light by The Sunday Times, revealing insurance companies' efforts to boost profits by clamping down on claims.
  • The company spent £36 million from its £7 billion life fund in GRE Financial Management, which experts estimate would have reaped a return of £140 million in 20 years had it been invested in the stock market.
  • Julian Farrand, the insurance ombudsman, suggested Linda might find it worthwhile to push for a higher settlement.
  • The ombudsman's terms of reference state that undisclosed facts only invalidate an insurance policy if they bear directly on the event that gave rise to the claim.

Statistics:

  • £28,000: The policy value that Guardian Royal Exchange has refused to pay out.
  • £165: The monthly mortgage bill left to Linda Doig after her husband's death.
  • £15,000: The ex-gratia payment offered by Guardian to Linda.
  • £36 million: The amount invested by Guardian in GRE Financial Management from its £7 billion life fund.
  • £140 million: The estimated return on investment in 20 years if the money had been invested in the stock market.
  • 50%: The pay rise awarded to the bosses of some of the country's biggest insurers last year.
  • 25: The multiplier of the rate of inflation for the pay rises awarded to insurance company bosses.

Sources:

  • "Life insurers clamping down on claims to boost profits." The Sunday Times.
  • "Insurance ombudsman's terms of reference." The Sunday Times.
  • "Guardian spends £36m of policyholders' funds on loss-making salesforce." The Sunday Times.
  • "Company bosses awarded pay rises of up to 50%." The Sunday Times.