Advisers Key to Combating Trauma Policy Confusion


Insurance & Financial Services Ombudsman (IFSO), Karen Stevens, has warned that the term ‘trauma’, used to describe trauma insurance cover, is too generic and doesn’t fully encapsulate how specific this type of cover can be.

“Trauma insurance is very specific,” said Stevens. “A common issue is that people believe trauma insurance will provide general cover for any traumatic experience, or if you cannot work because of ill-health. It won’t.”

Insurance & Financial Services Ombudsman, Karen Stevens

She says consumers themselves, financial advisers and insurers can all help solve the problem.

Consumers need to make sure to read and understand the policy they are signing up for and know what it will or won’t cover, she explained, adding that: “Financial advisers could do more to educate their clients about trauma insurance policies.”

“Re-naming the cover ‘critical illness’, as some insurers already have, would help,” she said.

Complaints to the IFSO Scheme about Health, Life and Disability Insurance made up 34% of all complaints from 1 July 2017 to 30 Jan 2018 (Health Insurance 12%, Income Protection Insurance 7%, Life Insurance 11%, Mortgage or Loan Protection Insurance 1% and Trauma Insurance 4%).

Seventy-five percent of complaints in this period which related to Health, Life and Disability insurance were not upheld, 23% were settled and 2% were upheld.

“Re-naming the cover ‘critical illness’, as some insurers already have, would help”

However, complaint enquiries related to risk insurance only made up 13% of the total over the same period. Of these enquiries, the top two issues consumers had about trauma insurance included scope of cover and interpretation of contract terms.

Trauma insurance related concerns made up five per cent of the complaints made to the IFSO in the last five years.

The IFSO Scheme highlighted two case studies of complaints they had received which demonstrated the confusion around trauma insurance.

In the first situation, a policy holder complained that the insurer should pay his trauma claim because he said the diagnosis of his kidney tumour and the surgery to remove it had been very traumatic.

However, his tumour was discovered to be benign and his trauma policy only covered life-threatening cancer, including “the presence of one of more malignant tumours”.

The IFSO Scheme concluded there was nothing it could do to give the complainant the outcome he desired because it was outside the policy cover as there was no evidence of malignancy.

In another case, the claimant had suffered a heart attack. His trauma insurance claim was declined because the medical diagnosis did not meet the policy definition of a “heart attack”.

“The diagnosis was for congestive heart failure and dilated cardiomyopathy. While the complainant’s heart was weaker, his heart attack had not caused a portion of his heart muscle to die, as was required by the policy. His condition was, therefore, outside the policy cover and the insurer was entitled to decline the claim,” the IFSO stated.