Being charged premiums for a policy without enjoying the full benefit is a no-no in the eyes of the ombudsman for long-term insurance.

The consumer who complained to ombudsman judge Ron McLaren took out a policy over the phone that covers people who are HIV-positive. The policy is marketed by AllLife Insurance and underwritten by Centriq Life Insurance.

An AllLife agent advised the plaintiff telephonically that the policy would have a disability benefit.  

He was told that to enjoy full cover he had to complete the underwriting process within three months and if he did not do so, his cover would be limited to accident cover only. Underwriting involves answering questions about your health so that the insurance company can assess its risk of providing you with cover.

The man did not complete the underwriting process and his policy was placed on accidental cover. He was notified in writing on March 30 2016. The plaintiff was again underwritten in August 2018, but due to being hospitalised for cancer, he did not pass underwriting. His premium was only then reduced for accidental cover.

In 2018, the insurer turned down a disability claim, which it said was not as a result of an accident. 

Irked by the rejected claim, the plaintiff asked that all his policy premiums be reimbursed because he believed that the cover had been amended without his consent.

An adjudicators’ meeting unanimously agreed that the insurer should refund the difference between the full-cover premium and the accidental-cover premium between March 2016 and August 2018 — the period in which he was only covered for accident and not for disability.

AllLife/Centriq disputed the provisional ruling, stating that premiums are only amended if, after the underwriting process, the benefit is reduced to accidental death only cover due to medical reasons during the risk assessment process. Premiums are not amended if the policyholder fails to finalise the initial underwriting process within the three months allocated.

The ombud agreed that the disability claim was not a result of an accident and that the insurer was correct in not paying out a disability claim.

However, McLaren said it was unfair that the policyholder paid premiums for disability cover while only qualifying for accident cover between March 2016 and August 2018. He instructed that AllLife/Centriq calculate and refund, with interest, the difference between the two premiums for the review period.

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