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Non-disclosure – treating customers fairly

Remember Momentum’s initial rejection of widow Denise Ganas’s R2.4 million life insurance claim?

This was when her husband, Nathan, was killed during a hijacking in March 2017.  The insurance payout was declined on the grounds of non-disclosure of information, as it came to light that Nathan had been diagnosed with raised blood sugar levels, which he failed to disclose in his application for life cover.

Although the cause of Nathan’s death was unrelated to his pre-existing condition, Momentum’s position was that he had an obligation to provide all relevant medical information in his application for life cover to be properly underwritten.  His failure to do so entitled them to reject the claim.  Had Nathan shared the relevant information when it was required, the underwriting decision could have been not to issue the cover and no claim would have existed.

Serious consequences

Much like life cover, people take out medical scheme cover to ensure that in the event of their ill-health their scheme will cover their healthcare expenses.  The rejection of a claim and the subsequent consequences of an unexpected termination of membership and having to cough up tens of thousands of Rands when hospital bills are declined by your scheme, can be devastating.

Not only do schemes have the right in terms of the Medical Schemes Act to cancel your membership on the grounds of non-disclosure of information, but you may also be found guilty of an offense and liable on conviction to a fine, or to imprisonment.

Importance of full disclosure

When completing your application form, be mindful of the fact that there can be serious consequences should you fail to declare material information about your medical history or that of your dependants.

Medical schemes assess your risk profile based on medical information provided in the application.  They may impose certain general and / or condition specific waiting periods.  The law is very clear when it comes to disclosure: it is not for the applicant to decide what is relevant or not, it is for the insurer to make that decision.  This is done to protect current members of a scheme from new members who join purely to claim for a certain event, i.e. when they need an operation and then resign before they have made any meaningful contributions to the risk pool of the scheme (an act referred to as anti-selection).  Anti-selection prejudices other members who are contributing on an ongoing basis and then have to carry the cost of those members who anti-select.

Medical schemes do their homework well

As a general rule, medical schemes don’t do investigations into your previous medical history at the time that you join them and there is no reason that they should.  After all, prospective members are all deemed to be honest when making declarations about their medical history.

Be honest.  You have nothing to lose.

There is a fine line between treating customers fairly and making the right decision for a medical scheme and its members.  Trustees have a responsibility towards the entire membership of a scheme and the medical scheme has a legal right to your medical history to enable it to assess its immediate and future risk.

In the event of non-disclosure of material information, membership may be terminated ab initio (as if you were a never a member).  Membership terminations are usually managed on a case-by-case basis and are never taken lightly, especially when the intent was to be dishonest, when important chronic or other serious medical information is withheld from the scheme or when certain acute conditions are treated regularly.

The devastating consequences of non-disclosure and of being kicked off your scheme when treatment is urgently needed and / or then having to pay huge medical bills far outweigh that of complete honesty and possible waiting periods.

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