Case study 3: Life assurance

The life assured died within months of taking out a policy

The life assured died within months of taking out a policy. On investigation, the company discovered he was an alcoholic and had been treated unsuccessfully for this for 10 years.

Its sales representative had left the policy application form questions on tobacco and alcohol consumption blank. The man denied receiving clinical treatment or investigations like X-ray and ECG.

The company would not have issued the policy had it known that the policy holder was an alcoholic. However, it told the ombudsman that in cases where questions on alcohol and tobacco consumption were left blank, it assumed that the person seeking cover did not drink or smoke. It has since changed its procedures.

The insurance ombudsman said she accepted that the company would not have issued the policy had it known the man was an alcoholic. However, she said that assuming that a blank response to the question covering this issue meant zero consumption was imprudent underwriting. In view of those circumstances, and the fact that he had denied receiving medical treatment when in fact he was, she partly upheld the claim and ordered a proportion of the sum due to be paid.