Not reducing premiums is unfair: Long-term insurance ombud

Judge Ron McLaren, Ombudsman for Long-term Insurance

The Ombudsman for Long-Term Insurance, Judge Ron McLaren, has expressed concern about the unfair practice by some insurers who do not reduce the premium when the benefits are reduced.

He said it was, therefore, crucial for purchasers of insurance cover to familiarise themselves with the policy restrictions because sometimes cover was restricted to accidental cover only whereas the insured had sought cover for illness.

He said some insurers advertise that they provide cover for people with certain conditions e.g. people who are HIV positive or suffer from diabetes.

“When the consumer phones into the call centre to apply for the policy, there is a lengthy conversation with the life insured.

“In many instances the life insured is not the person who initiated the application and who is the premium payer, but someone else, such as a family member.

“The policy cover is usually subject to specified conditions such as a medical test to prove that the person conforms to certain criteria in order to obtain the advertised cover.

“What might not be that clear to the potential insured and the premium payer is the fact that if the medical criteria are not met, the cover will be reduced to a default benefit – e.g. only accidental cover, and no cover for claims caused by illness.”

Judge McLaren said what compounded the confusion about the actual cover is the fact that the premium doesn’t necessarily reduce when the cover is restricted to accidental cover only.

“Our office views this practice of not reducing the premium as unfair. We have liaised with insurers in this market and with the Financial Services Board in regard to these policies, and insurers are changing their practices (including the one involving reducing premiums).

Consumers who purchased policies in the past might not have had their premiums reduced and might not have realised the restriction to accidental cover,” said Judge McLaren.


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