If you’ve ever filled out an application for insurance before, you would likely have noticed the clause that calls for full and faithful disclosure of facts. But have you ever wondered what would be the ramifications of not doing so?
In this article, we’ll unpack why this is important, and how withholding information could affect your claims payout.
Why disclose all facts during an insurance application?
When applying for insurance in Singapore, you will notice this statement usually highlighted in bold or under important notices in application/proposal forms: Statement under Section 25 (5) Cap. 142 of the Insurance Act or any subsequent amendments thereof – You are to disclose in this proposal form fully and faithfully all the facts which you know or ought to know about the risk that is being proposed, otherwise the policy issued hereunder may be void.
This is necessary and important so that customers will be reminded to disclose relevant information truthfully to avoid any complications in the future.
Being careless or dishonest in the application process can lead to financial consequences as the corresponding insurance payout or medical bills reimbursement may not happen. The insurance companies will either impose exclusions as an addendum to the existing policies or void the whole policy in the worst-case after their investigations.
However, you can be assured that the insurance companies will need to justify their decisions with findings from their investigations.
Pro tip: Use this insurance needs calculator to check if you’ve got sufficient insurance coverage.
What disclosures do you need to provide in an insurance application?
In a typical application, the insurance companies will require their customers to provide their height and weight to determine their BMI, lifestyle information such as the use of tobacco/drugs, whether they take part in hazardous/adventurous activities such as scuba diving, family history and answers to a list of questions checking on medical history. There would also be a section customised for female or underage customers.
All the information provided will be used by the underwriters to assess the application and determine the final terms that can be offered to the customers.
Here’s a tip: ensure that all the necessary supporting documents (if required) are provided at the point of application to make the process a smoother one.
However, some insurance products are designed to only require a simplified application process, in which case, less information will be asked for in the application form.
How can the disclosures affect the outcome of your insurance application?
The underwriters will carry out a thorough assessment of the information provided in your insurance application to decide its final outcome. There are a few possible outcomes after their assessment; here are some terms to help you understand them.
This means that your application will be approved and issued on standard terms and conditions. This is the best scenario for any insurance application. And in some situations, depending on the insurance companies, they may offer further premium discounts due to the health status of the customers.
This means that your application will be offered certain excluded terms and conditions due to the findings from the information provided in your insurance application. At this point, you will be asked to review the excluded terms and conditions in a counter-offer letter from the insurance company. You can either choose to accept or reject this offer.
Loading of Premium
This means that your application will be offered standard terms and conditions with a higher premium than usual, due to the risk being taken on based on the information provided in your insurance application. At this point, you will be offered the revised premium, and can choose to either accept or reject this offer.
This means that the insurance company is not considering taking in your application at that point due to the findings from the information provided in your insurance application. They will consider again when you submit a fresh application and medical evidence after an intervening period. This period can vary from a few months to years depending on the case.
This means that your application is declined by the insurance company due to the findings from the information provided in your application. This is the worst scenario for any insurance application.
However, if the outcome offered to you is not standard and you feel that there should be a better outcome, you can submit an appeal. You may appeal with the most recent medical evidence (at your own cost) that can potentially prove that you should be offered standard terms and conditions or at least a better outcome than the initial decision, though do note that the outcome will still be at the discretion of the underwriters.
Are there any insurance policies that cover pre-existing health conditions?
Singapore citizens and permanent residents are covered by a healthcare scheme called MediShield Life which is managed by the CPF Board. MediShield Life protects all members for life, including those with pre-existing conditions. This scheme will help to provide reimbursement for hospitalisation bills in the event of a claim.
Insurance policy with moratorium benefit
There may be insurance products that offer moratorium benefits. This type of benefit will allow the insurance companies to impose a window period whereby if there is no consultation, medication or treatments, the insured can be covered for the pre-existing conditions (subject to their terms and conditions). This type of benefit can be found in hospitalisation plans provided by some insurance companies and usually there is no need for a full health declaration at the point of application.
Company employee benefits insurance
In Singapore, companies can purchase employee benefits insurance for their employees. Typically, in such insurance, there will be options to include coverage for death, total and permanent disability, critical illness or personal accidents. It may also cover hospital and surgical, and outpatient general practitioner or specialist, treatments and dental.
Usually, the pre-existing conditions of the employees can be covered after a period of waiting time (such as after 12 months of continuous cover), or the plan can be customised to include the pre-existing conditions right from policy inception.
It is always advisable to read up on the product summary, policy wordings or policy contract carefully before making any choice, otherwise you can seek out a licensed financial consultant to assist you or provide a second opinion.
Take care to avoid the possibility of the insurance company voiding your policy due to non-disclosures after years of paying the premiums diligently.