Non-disclosure on a whole of life claim held in trust
Mr Evans took out a whole of life policy for £150,000 in March 2022. The application asked: 'Have you smoked or used nicotine products in the last 12 months?' He answered no. It also asked: 'In the last five years, have you consulted a doctor about chest pain, breathlessness or any heart condition?' He answered no. In fact, he had seen his GP about chest pain in 2020 and had been advised to stop smoking; he smoked five cigarettes a day. He died of a heart attack in June 2025. The insurer has obtained GP records and is investigating. The policy is written in trust for his two children. His wife is the main beneficiary under his will. The premiums were £95 a month. The insurer has not yet made a decision.
1. Analyse whether the insurer can reduce or decline the claim, applying the Consumer Insurance (Disclosure and Representations) Act 2012.
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The Consumer Insurance (Disclosure and Representations) Act 2012 applies because this is a consumer policy.
- The insurer must show a qualifying misrepresentation: a false answer to a clear question that a reasonable consumer would have understood was relevant.
- The smoking question is clear. He smoked five a day and had been advised to stop. Answering 'no' is likely deliberate or reckless.
- The chest pain question is also clear. He had consulted a GP about chest pain in 2020. At best this is careless; it may also be reckless.
- The insurer can avoid the policy for a deliberate or reckless misrepresentation. It can refuse the claim and may retain premiums.
- If the misrepresentation were only careless, the remedy would be proportionate: compare the premium paid with the premium that would have been charged. If the insurer would have charged more, the claim is reduced; if it would have declined, no cover.
- Cause is not the test. The heart attack is linked to the undisclosed symptoms, but the insurer does not need to prove that for avoidance.
The insurer must decide after reviewing the evidence. The trustees should be told.
2. Explain the remedies available and how the trust and beneficiaries affect the claim.
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Remedies under the 2012 Act depend on the type of misrepresentation:
- Deliberate or reckless: the insurer may avoid the contract, refuse the claim and keep premiums.
- Careless: the insurer must apply a proportionate remedy. It asks what it would have done and what premium it would have charged. The claim is reduced accordingly.
- Innocent: the insurer must pay the claim in full.
The trust matters because the policy is owned by the trustees, not by Mr Evans personally. The trustees make the claim. The children are beneficiaries, but they have no direct right to sue. If the claim is paid, the trustees distribute the money under the trust. If the policy is avoided, there is nothing for the trust. The will does not govern the policy, so the wife's position under the will is irrelevant to the policy proceeds. The trustees should consider a complaint to the insurer and, if necessary, the Financial Ombudsman Service.
3. What steps should the adviser take now?
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The adviser should act quickly and carefully.
- Obtain the full application, the trust deed and the insurer's letter.
- Check whether the adviser asked the questions properly and recorded the answers.
- Advise the trustees, not just the widow, because they are the claimants.
- Make a complaint to the insurer if there is any basis to dispute the non-disclosure, for example unclear questions or answers recorded incorrectly.
- Gather medical evidence and a copy of the GP notes.
- Explain the possible outcomes and timescales.
- Refer to the Financial Ombudsman Service if the insurer does not resolve the complaint.
- Do not promise a payout.
- Review the firm's application process to see whether similar cases exist.
If the adviser sold the policy, check professional indemnity notification requirements.