CR346 Underwriting Alleged unreasonable delay in processing application for dread disease cover


Alleged unreasonable delay in processing application for dread disease cover – in the interim complainant diagnosed with breast cancer and cover not granted.

During August 2010 the complainant, who already had other risk policies with insurer A, obtained a quote for dread disease cover from insurer B, and then approached insurer A to find out if they could give her better terms. As insurer A wanted to retain her as a client they engaged in negotiations with her financial adviser, who was insurer A’s agent, to persuade her not to move the complainant’s portfolio from insurer A. During the negotiations, which took some time, the complainant accepted insurer B’s quote and was granted dread disease cover the commencement date of which was to be 1 October 2010. Having in the meanwhile been persuaded by insurer A that they could offer better terms, the complainant cancelled her policy with insurer B on 1 September 2010 and on the following day applied for dread disease cover to be added to one of her existing policies with insurer A.

Although she had given her application for the policy alteration to her financial adviser on 2 September 2010, the latter only submitted it to the insurer on 7 September 2010, and informed her that the processing of the alteration would take no more than seven days. Insurer A explained that in terms of its service level agreement, policy alterations that do not require underwriting have to be processed within four days, while those that do require it, as in the case of the complainant, have to be processed within 30 to 45 days. The letter requiring the complainant to undergo certain blood tests was uploaded on 17 September 2010.

The complainant claimed that she was in good health when she applied for the policy alteration. However, on 21 September she discovered a lump on her breast which was initially thought to be benign, but after its excision on 27 September 2010 was found to be cancerous. At that stage the complainant had not yet complied with the underwriting requirements, and when she did so on 30 September 2010 cover was not granted due to the cancer diagnosis.

The complainant contended that the delay in processing her application was unreasonable and that it had caused her to suffer loss for which insurer A was liable. She explained that had there been no delay the intervening cancer diagnosis would not have affected her application as cover would probably have commenced by then. She further contended that as a result of being persuaded by insurer A not to take the dread disease policy from insurer B, she had cancelled said policy and could no longer qualify for cover due to the cancer diagnosis.

We found that the insurer’s delay was not unreasonable in that it complied with the insurer’s service level agreement. We also found that there was a delay on the complainant’s part in complying with the underwriting requirements, and that since according to the insurer policy alterations take effect on the first day of the month following the date of acceptance of risk, insurer A’s policy would not have commenced before the 1 October 2010. With regard to the complainant’s contention that she had suffered loss as a result of being persuaded to cancel the policy with insurer B, we found that as the commencement date of that policy was 1 October 2010, and in keeping with the common law requirement to notify the insurer of any changes in health occurring between the date of acceptance of the application for cover and the date of commencement of cover, she would have been required to disclose the cancer diagnosis to insurer B and would doubtless not have been granted cover.

February 2013