From the Financial Services Ombudman Annual Report 2007
A complaint regarding non payment of Income Protection Benefit raised interesting issues about what is covered: how aware are customers when they purchase such an Insurance product of its possible limitations and whether the conditions imposed by the Insurance Company in question were fair. I am concerned that many of these policies were being sold where the definition of blindness, or deafness or other ailments and disabilities may not have been fully explained to the consumers before they purchased such a policy. In my Final Decision while I stated that the Company had an arguable case under the contract that it need not pay, I found that in equity it had to.
Background to the Complaint
The Complainant commenced his policy with the Company in December 2002, which included serious illness cover and income protection. Following a brain haemorrhage / stroke in April 2006, the Complainant made a claim to the Company pursuant to the serious illness cover on the policy, and this claim was paid by the Company in September 2006. In October / November 2006 the Complainant made an additional claim to the Company seeking income protection benefit, but in May 2007 the claim was formally denied by the Company. The Complainant, who previously worked as a Sales Manager, said that because of his stroke, he will never work again. He has been registered as blind with the National Council for the Blind in Ireland (NCBI) since August 2007. In his complaint to me he sought payment of the income protection benefit pursuant to the policy which he purchased. I noted that the Company stated that claims for income protection benefit, are evaluated, not as against an individual’s ability or inability to work, but rather, against the “physical health test” criteria referred to in the Terms and Conditions of the policy. To have a valid claim, the Complainant must either:
(a) Be unable to perform 3 of 10 individual physical test or
(b) He must be unable to “see” as defined by the policy.
The Company acknowledged that because of the Complainant’s visual field deficit (reduced peripheral vision) in addition to his loss of visual acuity he qualified for “Blind Registration” with NCBI. Nevertheless the Company said that the Complainant’s loss of visual acuity was not sufficiently extensive to meet the criteria laid down in the Policy Conditions. The definition of “seeing” in the Policy Conditions was based on visual acuity alone. The Policy conditions included the following definitions:
Disability
“Disability is defined as satisfying the physical health test and/or the mental health test……”
“The physical health test is satisfied if the Life Assured can simultaneously satisfy three or more of the first ten conditions described below or the eleventh condition only.
(1) Sitting in a chair
(2) Getting up from a chair
(3) Standing
(4) Walking
(5) Lifting
(6) Walking up and down stairs
(7) Bending and kneeling
(8) Using your hands
(9) Reaching with your arms
(10) Fits and blackouts
(11) Seeing- You are certified either blind or partially sighted by an Irish Registered consultant Ophthalmologist. “Certified blind” means where you are so blind that you cannot do any work for which eyesight is essential. Your best corrected vision is not greater than 3/60 in the better of your 2 eyes.
“Certified partially sighted” means you are substantially and permanently disabled by defective vision caused by congenital defect or illness or injury. Your best corrected vision is not greater than 6/60 in the better of your 2 eyes.”
Consideration by me as Ombudsman
Before I made my final decision in November 2007 I referred to the following issues:
One also has to be conscious as to what an ordinary person understands by ‘Income Protection’ and while cooling-off periods and policy documents outline various matters, the fact that no particular reference was highlighted in the promotional literature- albeit it in the policy conditions- that blindness could be quite limited is a matter that should be considered by the Company in this case. However, equity comes into play in my role as Financial Services Ombudsman and I lay extremely high emphasis on the fact that a common understanding of an illness should, if it is not to be the case, be highlighted in a very prominent and important way and that all Sales Representatives should outline that very, very clearly before any purchase is made.
In December 2006 the Complainant’s GP filled out a Medical Attendance Statement which one part of it indicated that he met three of the conditions, whilst in the other part he did not. Indeed I find the form, to say the very least, confusing in language and I strongly recommend that it should be reviewed urgently by the Company. In January 2007 the Company queried the discrepancy. In February 2007 the GP made a general statement but then in March he indicated that a GP was not the most appropriate person to assess the abilities test and that an examination by an Occupational Health Specialist would be more appropriate. It appears that this was not pursued by the Company as it had relied on the definition of blindness as outlined in its policy. However I commended the Company for trying to sort out this problem because of the lack of information being supplied by the doctors. I noted that the Neurologist in his report of May 2007 stated “it is my opinion that he meets the criteria for visual deficit as described in the Physical Health test”. Indeed in June 2007 the same Neurologist said “I fail to understand what the difficulty is in terms of going ahead and granting him his cover as in his policy. Perhaps you should request a further medical opinion if you are debating in any way the opinion of the specialists here in this town.” In its letter of July 2007 the Company indicated to the Complainant that “your doctors have not confirmed that you are unable to do these tasks but that alternatively as a single test you must be unable to see as defined by the policy. The doctors have confirmed that while you suffer with a visual deficit, i.e. reduced peripheral vision, does not meet the definition of same in the policy conditions. I must also say that I understand that your own medical staff expressed a sympathetic opinion that they think you should be paid however the medical information provided does not support this.”
The foregoing did no credit, in my opinion, to the medical profession or to the Company. The plain fact is that the Complainant is blind, though not within the terms of the policy, cannot drive a car and is unable to work. Whether he did meet the other criteria of the abilities test has been left undecided because the GP concerned would not so certify and the GP’s suggested independent review was not carried out, even though it might be outside the terms of the contract. The Company has relied solely on the Blindness definition in the policy. That the Complainant should be required to suffer the ultimate consequences in these circumstances is in my opinion unreasonable and unjust. As regards the words in the policy illustration
“Income Protection provides you with a weekly income payment if you are unable to work and you satisfy the definition of disability contained in Section 4 of the Income Protection Policy Conditions”.
The Company submitted that this sentence should be read as a whole sentence. This is reasonable. In my opinion, the words “unable to work” suggest some relevance and not sole relevance as the Company suggested to the process of assessing a claim for Income Protection. In spite of this the Company state that claims for Income Protection benefit will not be assessed against an individual’s ability or inability to work, but solely on that individual’s performance in the “abilities test”. Be that as it may, I specifically make no finding in relation to the Company’s practice of assessing claims by reference only to the abilities test, as it was unnecessary in this instance to do so.
Decision and Financial Regulator Referral
In my decision I stated that:
The definition of blindness may not have been fully explained when the policy was sold and is not what an average and reasonable person may understand. The Complainant cannot drive a car, is unable to work and is registered as blind by the NCBI. The Neurologist appears to state that he met the Abilities Test though the GP not being as definitive as he should have been placed the company in an invidious position. However I think it was unfair and unreasonable that it did not take on board the GP’s suggestion as to how the Complainant should be assessed for the abilities test.
The confusion by the GP on the form is unfortunate but the Complainant’s own assessment in December 2006 was as frank and as truthful as I have come across in considering cases. He indicated that he did not meet condition 5 but could meet conditions 7-9 with difficulty.
For the foregoing reasons and having considered all the evidence I decided that the complaint was substantiated on the grounds that while the conduct complained of may have been in accordance with established practice, that practice as applied to the circumstances of this case was, in my considered opinion, unreasonable and unfair in its application to the Complainant. I also decided that the request by the Complainant to be given compensatory damages was
unjustified. As a result, arrears of €21,000 were paid by the Company in January 2008, while the Complainant’s current benefit is €1,400 a month.
On a general level I was concerned that many of these policies were being sold where the definition of blindness, or deafness or other ailments and disabilities may not have been fully explained to the consumers before they purchased such a policy. I considered it appropriate to refer this decision to the Financial Regulator for information and its applicability to other Companies. I appreciate that the requirements of the Regulator’s Consumer Protection Code should enhance this area very much going forward from 2007. The Regulator informed me that it had already during 2007 carried out a review of the sales and complaints handling practices of life insurance companies in relation to Serious Illness Cover, a product which shares some of the characteristics of Income / Permanent Health Insurance. Resulting from this review the Regulator asked the industry, in January 2008, to assess how firms inform their customers as to the definition of the particular illnesses covered and requested firms to ensure that all consumers fully understood the key points of the products.