An Insurance Dilemma in Non-disclosure, Misrepresentation or Concealment of Material Facts

Issues of non-disclosure, concealment or misrepresentation of Material Facts

A common confrontational piece between insurer and assured – in the guise of non-disclosure, misrepresentation or concealment of material facts, which in this case (outlined below) under discussed here was about the health aspects of the life assured. She bought the insurance without declaring that she has anemia….. there was no medical checkup since sum assured was below the threshold. She subsequently passed away due to a heart attack, nothing to do with anemia….. but happened after less than a year from the date of contract the insurance cover.

The insurer threw the claim out for non-disclosure and may even consider reporting the son for intention to defraud. Of course the son argued that her mother’s nemia condition had nothing to do with heart attack that was the actual cause of her death.

Read the August 26th article below…

Are the underwriters able to identify possible non-disclosure of this anemic condition based on the information as provided in the proposal form if they did indeed put in the effort?

Shouldn’t the insurance company examine her before contracting the life cover? The amount was RM200,000 and it is not unusual for the company to insist on a medical examination for a simple reason…. her age. I am sure there were signs of possible non-disclosure that the agent who handled this case would have known, for example, that the life Assured did not have a high enough income for a RM200,000 insurance cover or perhaps situation of the transaction should have aroused suspicion of the agent especially where the payment was being made by the son. This would have triggered a need for a check on the intention behind the purchase of the policy.

However as expected agents are more concern with getting the sales in…. that’s their agenda thus helping the insurance company to detect non-disclosure, concealment or misrepresentation by the Assured has never been their focus. Moreover agents are not trained for such identification purposes, and also because they expect whatever that were disclosed by the Assured as required in the proposal form are for the insurance company’s underwriters to further scrutinise before finalising a contract with the Assured.

So what is or are needed to be disclosed, stated or provided in the proposal form? Perhaps the next keyword should be on “Material Fact”.

Material facts may be viewed from this perspective…..

“The principle of “utmost good faith” requires anyone seeking insurance to disclose all the material facts about the risk that he knows, or should know. A material fact has been defined in a number of legal cases and broadly is “any fact which may influence the judgement of a prudent underwriter in deciding whether to accept a risk and if so at what rate of premium.” How do you as an Insured know what an underwriter may regard as ‘material’? If in doubt as to whether some piece of information is relevant, tell insurers anyway. While the law has softened in favour of the Insured in many territories, it is still normally possible for the insurer to turn away any claim if there has been a breach of utmost good faith i.e. material facts have been withheld by the Insured”


Son sues insurance company over death benefits
Friday, August 26, 2011

The son was to receive RM200,000 in death benefits after his mother died but the insurance company claims that he is trying to cheat them.

SEREMBAN: A son is suing a major insurance company for not paying RM200,000 in death benefits from his late mother’s policy. He has lodged a police report alleging cheating by the insurance company.

S Isaikumar, who was accompanied by Seremban PSM secretary S Tinagaran, told a press conference after lodging the report at the Seremban district police headquarters that his mother, V Santha, had purchased a policy with the company on July 27, 2009, and paid a monthly premium of RM304.28.

“My mother passed away on March 21, 2010, following a heart attack. I submitted the death certificate to the headquarters of the insurance company in Kuala Lumpur and was told by a staff that there were no problems in my claim and I will receive my cheque in two months’ time.

“However on May 18, this year, which is a year after I submitted my claim, the insurance company sent me a letter informing that my claim was rejected, and instead sent me a cheque for RM2,434.24.

“On May 19, I went to the insurance company again and demanded an explanation.

“They told me they can’t do anything and this is my fault as my mother did not undergo a medical check-up before she bought the insurance policy. They accused me of cheating the insurance company,” said Isaikumar.

He added that the insurance company told him that it will re-assess his claim. Later the case was passed over to R Ganaraj from the investigation services unit.

He added that Ganaraj met him on June 10 this year and warned him not to pester the insurance company over the matter.

“He also told me that he is actually a policeman who works part-time with the insurance company,” he said.

Unreasonable excuses

Isaikumar said that he met Ganaraj again to return the RM2,434.24 cheque given to him, following which he was accused by the insurance company of hiding his mother’s real health status from the company.

“They said that my mother had suffered from anemia and that we had not conveyed this fact to the insurance company,” he said.

Tinagaran, meanwhile, said that Santha’s death had nothing to do with anemia.

“We consulted at least two doctors, one of whom is Sungai Siput Dr Michael D Jeyakumar, and they told us that anemia had nothing to do with heart attack.

“As an insurance company, they should have asked Santha to do medical check-up before they approved the policy. They received the high monthly premium from Santha and are now giving unreasonable excuses.”

Tinagaran also said that the police have recorded Isaikumar’s statement and had informed him that this case would be handled by the commercial crimes department.

(Extracted from National Express Malaysia)

Non-disclosured, Misrepresentation or Concealment of Material facts…. An understanding too far?

From established courts cases, the basic principles are still difficult for the general public to fathom and definition like what was prescribed above is not something an ordinary guy is able to deal with. Usually the agent’s understanding of the issues surrounding the use and application of the those terms, non-disclosure or concealment….. is also not up the par. And, his or her thoughts would had been clouded by the commission….

Sometimes we cannot blame the Assured or her representative at that point of purchase – situation or words used by agent may lead them to think it was alright to conceal or not disclosing every other details onto the proposal form….. Moreover you cannot expect the Life Assured to declare all matters if he or she is unsure of, whether those were material facts that could have affected the minds of the prudent underwriters!

Life Assured sees things from the micros and the varieties of thinking complexity….
Life Assureds think they are angels and half truth is as good as the truth

Life Assureds think they are angels and half truth is as good as the truth

 Insurer looks at Assured in this manner?
Insurer thinks Assured must adhere strictly to all the instructions

Insurer sees things differently always from their own perspectives not from those of the Assured. Isn't this something from the old school that should not have survived these days where consumers are kings!

It is ridiculous for Assured to declare everything in these days where CONSUMERS are Kings…. it is really the job of the insurers to work out proper procedures to guide the Assured appropriately and realistically…. not AT YOUR PERIL sort of mentality!

Definitely not Let The Buyer Beware…. because this carry over proviso from the old school of thoughts should not have survived today’s consumer’s expectations.

We would think these clashes of mindset are best illustrated in the two images above.

Whatever that is…. we let you decide if this piece of dispute is the doings of the insurer or the misadventure of the Assured / her son…. For simple reading we have insert a brief on Anemia below….

What Is Anemia? 
Anemia is a condition that develops when your blood lacks enough healthy red blood cells. These cells are the main transporters of oxygen to organs. If red blood cells are also deficient in hemoglobin, then your body isn’t getting enough oxygen. Symptoms of anemia — like fatigue— occur because organs aren’t getting what they need to function properly.

Anemia is the most common blood condition in the U.S. It affects about 3.5 million Americans. Women and people with chronic diseases are at increased risk of anemia. Important factors to remember are:

  • Certain forms of anemia are hereditary and infants may be affected from the time of birth.
  • Women in the childbearing years are particularly susceptible to a form of anemia called iron-deficiency anemia because of the blood loss from menstruation and the increased blood supply demands during pregnancy.
  • Seniors also may have a greater risk of developing anemia because of poor diet and other medical conditions.

There are many types of anemia. All are very different in their causes and treatments. Iron-deficiency anemia, the most common type, is very treatable with diet changes and iron supplements. Some forms of anemia — like the anemia that develops during pregnancy — are even considered normal. However, some types of anemia may present lifelong health problems.

What Causes Anemia?

There are more than 400 types of anemia, which are divided into three groups:

  • Anemia caused by blood loss
  • Anemia caused by decreased or faulty red blood cell production
  • Anemia caused by destruction of red blood cells


Happy reading and do give us some comments by writing onto the comment form below….

Selamat Hari Raya to all our readers and also Happy celebrating Malaysia’s Independence Day on the 31st August 2011. Cheers always…..


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2 comments for “An Insurance Dilemma in Non-disclosure, Misrepresentation or Concealment of Material Facts

  1. secret990201
    August 30, 2011 at 20:51

    So what de conclusion? claim payable or not? insurance comp always wanna find ways to deny claim? why insurance comp put in better control on how pppl buy insurance, not difficult to get older folks who had never buy life insurnace b4 to do medical checkup

    • September 3, 2011 at 20:50

      I would like to think this claim is ultimately payable, maybe on some negotiated settlement. I would expect it is an uphill task for the insurer to prove if the anemia has nothing to do with the heartattack.

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