Ticking No on a Medical Question to Avoid Loading

The information was material. Materiality is judged by whether a prudent insurer would regard the fact as relevant to deciding whether to accept the risk, and on what terms. It is not judged only by whether the fact later caused the death. Farhan's diabetes, medication and hospital admission for chest pain fall squarely within the questions asked and would ordinarily lead an underwriter to request medical evidence, apply a loading, impose an exclusion, or decline cover. The 2019 admission may have been investigated further even though no heart disease was diagnosed, because chest pain is a relevant symptom. The fact that the policy was issued at standard rates shows the underwriter did not receive the information, not that the information was unimportant. The application question was specific, so there was no ambiguity. The omission therefore distorted the insurer's risk assessment and affected the terms of the contract. A reasonable underwriter would have wanted to know about the diabetes and the hospital admission before pricing a Rs 5 million term policy.

Sana's conduct is a serious breach. She elicited false answers, advised the client to conceal material facts, and obtained a blank signature. That is not a minor administrative error; it is misrepresentation and a failure of integrity. An agent must record the client's answers accurately, explain the duty of disclosure, and never complete or alter a declaration without the client's knowledge. Farhan also had a duty to answer honestly. He knew about the diabetes and the admission, and he signed the declaration, even if blank. His reliance on Sana may mitigate his responsibility, but it does not erase it. The insurer is entitled to rely on the application and to investigate claims. It may avoid the policy for fraudulent non-disclosure or misrepresentation, subject to the policy terms and any incontestability period. The insurer would need to show that the facts were material and that it would have acted differently. Sana's knowledge may be imputed to the insurer in some circumstances because she was its agent, but deliberately false answers made in collusion with the client are different from innocent mistakes. The insurer can rescind and may refund premiums, while pursuing Sana separately.

Sana should have read each question to Farhan, recorded his answers exactly, and explained that nondisclosure can lead to claim denial. She should have disclosed the diabetes, medication and 2019 admission, and advised him that the insurer might request a medical examination or apply a loading. She should not have commented on how to avoid a loading, obtained a blank signature, or completed a medical declaration herself. If Farhan refused to disclose, she should have declined to submit the application and documented the reason.

The nominee should request the insurer's written decision and the evidence relied on. She can argue that Sana, as the insurer's agent, completed the form and misled Farhan, so the insurer should bear responsibility. She should complain to the insurer's grievance channel, the Securities and Exchange Commission of Pakistan, and the Federal Insurance Ombudsman. A police complaint may be considered if the blank signature was misused. The nominee should gather Farhan's medical records and any messages with Sana. Success will depend on proving what Sana asked and what Farhan knew; the insurer will argue that the client signed a false declaration. The matter may settle, but the claim is at serious risk.