Each year, many insurers share their claim statistics highlighting how many people have been supported through a protection policy each year. In April, we shared our claims report showing we paid 95% of all personal protection claims in 2024¹. It’s easy to focus on the bigger number, and as an industry we often do. Instead, I want to flip the 95% on its head and explore the 5%¹ of claims we didn’t pay and why.
Misrepresentation is the biggest cause
Last year, over 7 in 10 of the claims we couldn’t pay were due to misrepresentation¹. With many insurers reporting similar experiences, it’s clear it’s an industry issue, and there’s a growing need for education on the topic.
Providers and advisers both have a role to play to make sure we’re delivering the right outcome for clients at a time that they’ll need it the most. Let’s face it, nobody wants to be in the position of delivering bad news to your client, or their loved ones, at a time where they needed their protection the most.
So, what is misrepresentation?
Put simply, misrepresentation is when someone doesn’t tell us relevant information about their health or lifestyle when they apply for a policy. There are a few different forms of misrepresentation, and it’s important to distinguish between these:
The impact: It’s not always black and white
In some cases, had the correct information been provided at outset, we would have had to apply exclusions or a loading to reflect the increased risk. There are times when we wouldn’t have been able to offer cover at all.
Depending on the form that the misrepresentation takes, and taking into consideration individual circumstances, we might not be able to pay a claim. In instances of deliberate or reckless misrepresentation, we may also not be able to refund their premiums.
However, it’s not always black and white. At LV= we adopt a human-led approach to underwriting and claims. We have a ‘grey claims’ forum, where our experts meet to consult on claims that aren’t clear cut and arrive at a decision. We recognise that there are nuances in every claim, and times where we should make an exception despite our T&Cs, because it’s the right thing to do.
Common areas of misrepresentation
Year on year, we see similar themes of misrepresentation across our claims experience. Most of the misrepresentation occurs at the lifestyle and health sections of the application, with common areas including:
With these being ‘hot’ areas for misrepresentation, it can be worthwhile prompting your client at these points on the importance of taking the time to fully consider their answers accurately reflect reality.
While it can be a sensitive topic, it’s important clients realise the impact of underreporting in areas such as alcohol consumption or advice to cut down. It’s common for many to misjudge the units they consume each week. 1 in 5 adults regularly exceed 14 units a week² – that could look like 5 pints of beer a week, which many would not consider excessive.
In June 2022, Kerry* applied for a policy with us. She did not make any declarations and told us she drank 4 glasses of wine a week.
In March 2023, her husband called to inform us she’d recently passed away. After obtaining medical evidence, we learned that Kerry had a long history of problems with alcohol and her drinking had increased just prior to her application. 2 weeks prior to her application, she had seen her GP as she had gastric symptoms and was losing weight. Her GP referred her blood tests and advised her to stop drinking alcohol. Had we known of her issues and the medical investigation she was having, we would not have been able to offer her cover. As a result, we were not able to pay her claim.
*Name is for illustrative purposes only.
How can you minimise misrepresentation as an adviser?
Advisers can take steps to make sure any misrepresentation is minimised at point of application.
In our claims report, we share a simple checklist that you can follow to make sure you’ve covered as many bases as possible to reduce the chance of misrepresentation occurring. This can include, making sure clients come prepared to the meeting with all the information they need at hand to complete their application accurately.
Our pre-underwriting tool can also be used to set expectations with clients before going fully into the application journey. It provides an indicative underwriting outcome for thousands of illnesses and conditions within seconds.
¹ LV= Claims Report 2024
² Health Survey for England 2022, NHS
Our Business Protection comes with a range of options. They’re flexible and help you offer the best solution to your client.
When it comes to recommending business protection, there are many factors for you to consider. To streamline this process, we’ve developed a range of calculators.
Your account manager can provide dedicated business protection support including training and case consultancy.
