【Insurance Clinic】No disclosure of musculoskeletal condition; policy cancelled after cancer diagnosis. Over HK$100,000 unpaid?

10Life received a complaint from Ms Lam (pseudonym) regarding a declined claim. In mid-2021, Ms Lam purchased a high-end VHIS policy. Towards the end of that year, melanoma was detected on her arm, and she subsequently underwent two operations. When Ms Lam later submitted a claim to the insurer for medical expenses of over HK$100,000, the insurer not only refused to pay out, but also directly “kicked out” the policy by cancelling it.

After conducting an investigation, the insurer explained that when she applied for the insurance, she had failed to disclose a musculoskeletal condition in her knee. However, to the best of her recollection, she had never had such a condition. She had merely suffered a mild sprain to her right knee when moving house in early 2021, and had undergone an MRI scan to confirm the sprain. The condition was minor, required no follow-up, and was also certified by a specialist orthopaedic doctor.

As the sprain had already healed by the time the insurance was purchased, Ms Lam did not disclose that she had previously sprained her knee and undergone an MRI scan. She attempted to communicate with the insurer and explain the situation, but the insurer still insisted on cancelling the policy.

In response to the insurer’s decision, Ms Lam lodged a complaint with the VHIS Office. Based on the reply from the specialist doctor representing the insurer, the VHIS Office stated that the MRI report showed she had a musculoskeletal condition, and therefore the insurer had not breached any rules. However, Ms Lam’s attending specialist diagnosed the MRI report as a “sprain”. Ms Lam believed that the insurer had in fact made things up out of thin air, and found the investigation result baffling and disappointing.

According to the information provided by the reader, Miss Lam submitted a claim just a few months after taking out the policy. This is an example of an Early Claim case, and insurers will ordinarily adopt a very stringent claims process, including requesting the insured person’s medical records from different medical institutions to check whether anything has been omitted from disclosure. Secondly, if Miss Lam did not disclose at the time of application that she had undergone an MRI examination, the insurer may rely on the customer’s failure to observe the principle of “Utmost Good Faith” in disclosing her medical history, and subsequently cancel the policy or decline the claim. However, from Miss Lam’s perspective, the standard underwriting questionnaire for VHIS states that if a “muscle strain has fully recovered”, disclosure is not required; but when the strain involved an MRI examination, should it instead be disclosed under “examinations undergone in the past five years”, with the test results provided as well? The wording of the VHIS underwriting questionnaire is inevitably ambiguous to applicants (see the figure below).

Figure 1: Example of an insurance application form¹

When policyholders disclose their medical history, they usually answer only according to the insurer’s underwriting questionnaire. As Miss Lam’s “muscle strain has fully recovered”, it was indeed not required to be disclosed under the underwriting questionnaire, and her attending specialist never stated that she had a musculoskeletal disorder. She may already have done her utmost to disclose her medical history, and the author considers that she may seek to protect her rights from this angle.

In general, being cancelled by the insurer has a far-reaching impact on the insured person. Not only does the person immediately lose the original protection, but future applications for insurance also become very difficult due to changes in personal health conditions and the experience of having a policy cancelled.

In addition, where possible, insurers should take more moderate action, such as excluding the relevant condition or increasing the premium. The insured person’s insurance intermediary may also negotiate with the insurer along these lines.

Any policyholder who considers that the insurer or the office of the VHIS has handled an application or claim unfairly may lodge a complaint with the Insurance Complaints Bureau and the Consumer Council, in order to seek a fair resolution.

Finally, if readers have any questions or concerns regarding policy claims, please feel free to contact 10Life Financial. 10Life Financial’s claims specialists focus on securing reasonable compensation for clients, and guide clients in submitting the required documents to insurers, following up on claims progress with insurers on time, and reviewing whether the insurer’s compensation amount is sufficient. If the insurer declines the claim or offers insufficient compensation, the claims specialist will negotiate with the insurer on the client’s behalf.

Email: enquiries@10life.com

Notes:  

1. The example insurance application form is randomly selected and does not represent any insurer 
2. 10Life Financial’s claims specialists are licensed insurance intermediaries authorised by the Hong Kong Insurance Authority. 
3. Last updated: 14 September 2022.

This English version of this article has been generated by machine translation powered by AI. It is provided solely for reference purposes. In the event of any discrepancy or inconsistency between this translation and the original Chinese version, the Chinese version shall prevail.