Why your Life or Medical Insurance claim gets rejected and how to go about it?

Why your Life/Medical Insurance claim gets rejected and how to go about it?


LIFE INSURANCE offers a financial security for you or your dependents upon your unexpected death or if you suffer from total permanent disability from an illness or injury. Types of life insurance policies include term life insurancewhole life insurance and investment-linked insurance. 

MEDICAL/HEALTH INSURANCE on the other hand provides financial aid if you suffer from an accident or illnesses. Family Takaful is the Shariah compliant version of life insurance product and it is available for everyone. 


How to make a claim?

To file a claim with your insurance provider, you  or your next-of-kin must provide evidence and relevant documents relating  to the incident,  such as  death certificate, the original bills, receipts, complete doctor’s reports, surgeon’s cost summary etc. 


The insurance provider will validate your claim and compensate you according to the policy coverage that you have purchased. 



What are the common reasons for the rejection of claims?


Lack of understanding on the policy/certificate terms and conditions

Many policyholders do not have full understanding of their policy/certificate benefits and coverage. They do not know the terms and conditions that need to be fulfilled before they are deemed to be eligible for critical illness related claim. Many are not aware of the policy/certificate exclusions listed.


Policyholders assume that once they are diagnosed with any of the critical illness listed in the policy, they are covered without realising that they must meet the requirements specified in the policy.  

For instance, if a policyholder was diagnosed with a ‘stroke’, the criteria  which must be fulfilled before the claim is considered as eligible is that  the cerebrovascular accident or incident producing neurological sequelae of a permanent nature must have lasted for not less than six months and must be supported by changes seen in CT scan or MRI and certified by a neurologist. If the stroke does not last for six months or if there is no CT scan or MRI available, the benefit will not be payable.


Policyholders are also not aware of their rights to cancel the policy/ certificate during the 15-day free-look period starting from the date of receipt of the policy/certificate


It is the policyholders’ duty to read the terms and conditions of the policy contract /certificate carefully to determine whether the terms meet their requirements. If they do not agree with the terms and conditions, they should highlight to their insurer/takaful operator and proceed to cancel the policy/certificate during the free look period.


Failure to disclose past medical history in the proposal or renewal form

In line with the requirement under Schedule 9 of the Financial Services Act/Islamic   Financial Services Act 2013, financial service providers have incorporated specific questions in the application form for consumer insurance/takaful contracts.


Policyholders should not make any misrepresentation to the licensed insurer/takaful operator when answering the questions on the proposal form. The information provided in the proposal or renewal form is considered material and relevant to the decision of the insurer/takaful operator whether to accept the risk or not as well as the rates and terms to be applied.


Policyholders must ensure the details and answers are correctly filled out before signing the proposal form. If their past medical history was not disclosed and such misrepresentation is considered as “deliberate/reckless”, the insurer/takaful operator is entitled to void the policy/certificate.


Misrepresentation or mis-selling of policy by the agent 

Most policyholders rely heavily on the intermediary or agent as they lack knowledge in insurance/takaful products. They believe that their agent is highly experienced and are able to offer expert advice. Relying on their agents, policyholders tend not to peruse the product disclosure sheet, sales illustration, and the policy/certificate terms which sets out of the main features of the policy/certificate and the scope of coverage.


In most cases, the policyholders only realise that the product did not meet their financial expectation years after the commencement date of the policy. Based on our observations, in most instances the insurance agent had misinterpreted the policy’s product features which had misled the policyholder into purchasing the product. 


Under such circumstances, the burden to prove whether there was misrepresentation/mis-selling of a product lies on the policyholders. The policyholders must prove that   their sales agents had influenced them into making the decision to purchase the said policy. 


We cannot emphasise enough that policyholders must read and understand the product disclosure sheet or sales illustration and seek clarification from the sales agent or insurer/takaful operator to assist them in making an informed decision before signing the contract.


What should you do if your Life/Medical Insurance claim gets rejected? 


Not all claims submitted are eligible to be reimbursed by the insurance provider. An insurance policy is a contract between you and the insurance company, and the protection provided is subject to terms and conditions stated in the policy.

If you feel that your claim is unreasonably rejected by the insurance provider, you are entitled to appeal. If you are still dissatisfied with the final decision of the insurance provider, you may approach the OMBUDSMAN FOR FINANCIAL SERVICES (OFS).




How OFS resolves your dispute? 

Once you have received the final decision letter from your insurance provider, you may lodge a complaint with OFS. If your dispute is within OFS’ jurisdiction, we will proceed to register the complaint. We will gather all the pertinent documents related to your case and begin our investigation. 

We look at each case independently and impartially. We do not take sides.   OFS weighs all the facts and evidence provided by complainant and insurance provider. We take into consideration what is fair and reasonable in resolving the dispute.




Mis-selling of Insurance Product


Ms Karen (not her real name) and her two siblings bought a regular premium whole life participating plan in 2007. The insurance agent handed them flyers that stated, “Guaranteed 4+3% per annum”. This statement gave them the impression that the guaranteed interest is at 7% per annum. However, in 2019, they were informed by the insurer that the policies provide a guaranteed annual cash payment of 4% instead of 7%.

Consequently, Ms Karen and her siblings made a complaint against the agent for the lack of transparency and for misleading them of the policy features during the sales presentation. They alleged that the agent had assured them that the product guaranteed cash payment at 7% per year. They requested for a full refund of premium. Their claim was rejected by the insurance company and they referred the matter to OFS. 

OFS investigated the claim and found that the policies issued to Ms Karen and her siblings contained the following clause:  

“A Guaranteed Annual Payment of 4.0% of the Initial Basic Sum Assured is payable annually at the end of each policy year starting from the 10th policy year onwards up to maturity age of 85, subject to Life Assured’s survival to the end of the policy year.”


It was noted that there was no Product Disclosure attached to all the policies. A Product Disclosure is a document which financial service providers must provide the prospective customers when a financial product is recommended or offered. It includes information about the product's key features such as fees, commissions, benefits, risks, and the complaints handling procedure to help consumers make an informed decision about purchasing the product. 

The agent had also failed to provide detailed sales illustration or brochures on the product feature. The product’s sales illustration table is a one-page document which provides basic illustration on the accumulation of the Guaranteed Annual Payment Option which includes portion of the Guaranteed and non-Guaranteed payment. As a result, the Ms Karen and her siblings relied entirely on the flyers at the point of sales as the source of printed information on the product.  

It is observed that the marketing materials do not specifically state the portion of non-guaranteed interest of 3%.   The absence of the word ‘non-guaranteed’ for 3% interest gives a false impression that the total guaranteed interest is 7% instead of 4%.   

In addition to the above, the Confirmation of Advice (CA) forms signed by the agent confirmed only the customers’ financial goals and the product recommended. The CA should contain a summary of the fact-find, product recommendation and key features of the insurance product. 

There was no validation obtained from Ms Karen and her siblings to confirm the matters below: 

  • that they have fully understood all advice and recommendations that were given by the agent, including the features of the products recommended;


  • that they have studied and fully understood the brochure(s) or sales illustration which were given to them in respect of the life insurance product that they were planning to purchase;


  • that they were aware of the benefits offered by the life insurance product and were satisfied that they serve their needs; and


  • the agent has disclosed and explained all material facts and information relating to the proposed insurance applied. 



Based on the above findings, a recommendation was issued in favour of Ms Karen and her siblings. The recommendation  was accepted by both the insurance company and the complainants. 

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