Critical Illness Claim and the Waiting Period
Lena, 47, holds a critical illness policy with a $150,000 sum insured covering cancer, heart attack, and stroke. The policy has a 90-day survival period and a 90-day waiting period from issue. She was diagnosed with early-stage breast cancer 70 days after the policy was issued. Her physician confirms the diagnosis, and treatment (lumpectomy plus radiation) begins immediately. Lena had mentioned a suspicious mammogram to her broker before applying but did not disclose it on the application, which asked whether she had any pending investigations. Her insurer is now reviewing the claim and has raised both the waiting period and non-disclosure.
1. Analyze the insurer's two grounds for denying or reducing the claim.
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Ground 1 - Waiting period. A 90-day waiting period means no claim is payable for a condition diagnosed within 90 days of issue. Lena was diagnosed at day 70. On the wording, the claim likely fails on this ground alone, regardless of the merits.
Ground 2 - Non-disclosure. The application asked about pending investigations. Lena had a suspicious mammogram and did not disclose it. This is a material omission because a reasonable underwriter would have postponed or declined coverage. That can give the insurer grounds to rescind the contract, not merely deny this claim.
Interaction: If the contract is rescinded for misrepresentation, the waiting-period analysis becomes secondary. The insurer may refund premiums and void the policy.
Possible mitigations:
- If the question was ambiguous, or the mammogram was routine screening rather than an investigation of a symptom, the materiality argument weakens.
- The broker's knowledge does not automatically bind the insurer, but if the broker knew and failed to record it, a complaint against the broker may follow.
Conclusion: The claim is likely denied, and the stronger ground is non-disclosure because it can void the policy entirely.
2. What was the broker's obligation when Lena mentioned the mammogram, and how should the broker respond now?
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Obligation at application:
- Ask and record. The broker should have asked directly about the mammogram result and recorded the answer, even if Lena said it was "probably nothing."
- Explain materiality. The broker must tell the client that pending investigations are material and that omitting them can void the policy.
- Never complete the application for the client. The client signs and is responsible for accuracy, but the broker must not steer answers.
Response now:
- Cooperate honestly with the insurer's investigation. Do not coach Lena to reshape the facts.
- Acknowledge any error in the file notes and inform the insurer if the broker's records show the disclosure was discussed but omitted.
- Explain the outcome options to Lena: rescission, refund of premiums, or a possible negotiated resolution.
- Advise her of the insurer's internal complaint process and the external regulator or ombudsman.
The ethical core: the broker's loyalty to the client does not extend to concealing a material fact from the insurer. Candour protects the client's long-term interests and the broker's licence.