Personal accident insurance
introduction
Personal accident insurance is provided in two ways:
as a stand-alone policy (these may be individual or group policies – for example, where an employer takes out a policy on behalf of its employees); or
as a benefit included as part of another product – for example, with travel insurance or with a bank account.
Most
personal accident policies pay lump-sum benefits when the policy terms are met. These usually require the consumer to suffer death or bodily injury, that arises from an accident or unforeseen event. The consumer’s claim must not fall within an exclusion clause. And policies usually state that the consumer is not covered if the death or bodily injury is caused by “sickness, disease or any naturally occurring condition or process”.
Standard areas of cover are:
- death;
- permanent total disablement; and
- loss of, or loss of use of, a limb.
But some policies additionally cover permanent partial disablement, temporary total disablement and/or temporary partial disablement.
Personal accident policies vary in terms of levels of benefit, the definition of key terms, areas of cover and exclusions. This note assumes that some typical combinations of policy conditions are included, but different outcomes may be appropriate where policy terms vary.
Because
personal accident policies offer protection only against accidental death and bodily injury, consumers should carefully consider what type of protection is best suited to them. If the consumer wants protection for sickness or general disability, other forms of insurance may be more appropriate. If the consumer is being advised, the adviser should also take these considerations into account.
what complaints do we see?
Complaints that consumers refer to us most frequently are that the financial business refused to pay the claim by wrongly deciding that:
the death or bodily injury was not as a result of an accident;
the death or bodily injury was not solely and directly as a result of the accident (for example, there was an illness that contributed);
an exclusion clause should be applied; or
the consumer was not sufficiently disabled.
We also commonly see complaints from consumers that:
the financial business should have paid more to settle the claim; or
the policy was mis-sold.
was there an accident?
This is a requirement of the cover – but sometimes the word “accident” is not even used in the policy. Instead, the consumer may be required to suffer death or bodily injury as “the direct result of an accidental, external, violent and visible cause”, or words to that effect.
what does "accidental" mean?
If there is no definition of "accidental" in the policy, we generally apply the normal meaning of the word: an unforeseen or unexpected and unfortunate occurrence. It can either be the cause or the result that is unexpected, but at least one of them must be this.
what is an "external, violent and visible cause"?
We will look at the particular circumstances of the event in the light of the common interpretation of the policy wording. In many cases this will be straightforward: a car accident, for example, will be external, violent and visible whereas a heart attack may be violent and visible but not external.
However, events are not always so straightforward and, in particular, linking the death or bodily injury to a particular cause may be problematic. For example, was the heart attack the cause of the car accident? Or was the car accident the cause of the heart attack? Or in fact, was the consumer the victim of two unrelated events?
Consideration of these cases will typically involve establishing the actual sequence of events that led up to the death. There may also be difficult questions of "causation" – if the heart attack did happen before the accident, was it the accident that killed the consumer, or would they have died anyway because of the heart attack?
is the death or bodily injury "accidental" if it occurred in relation to surgery?
Claims made because a consumer died or suffered a bodily injury following surgery are often turned down by financial businesses on one or both of two grounds:
the death or bodily injury was not accidental; and/or
the accident was not the sole and direct cause of the death or bodily injury.
Again we adopt a common sense approach. All surgery involves some risk. Generally we try to distinguish between cases where the risks were explained to the consumer and they were simply unlucky – and those where something unexpected, unplanned or negligent happened before, during or after the surgery.
were there contributory causes?
Most personal accident policies require the death or bodily injury claimed for to have resulted solely and directly from an “accidental cause” – and state that the consumer is not covered if the death or bodily injury is caused by “sickness, disease or any naturally occurring condition or process”.
This means that financial businesses turn down claims on several grounds:
there were factors other than the accident that resulted in the death or bodily injury – for example, illness, disease or a degenerative condition;
the accident merely brought forward a death or bodily injury that would have occurred anyway because of an existing medical condition; or
the consumer was already disabled and the accident merely increased the level of disability.
Financial businesses usually refer to medical reports/records, the death certificate and/or the coroner’s report when turning down claims for these reasons.
what if there were factors other than the accident?
Our approach will be shaped by the circumstances of the case – in particular, the degree to which the accident contributed to the death or bodily injury that is claimed for.
If we are satisfied that the accident alone would have resulted in death or bodily injury, we generally do not consider that financial businesses should be able to avoid liability simply because there were other contributory causes. In these cases, we would normally tell the financial business to pay the claim.
If we decide that the accident was not a significant contributing factor to the death or bodily injury, we will not usually recommend a payment.
If we decide that it is more likely than not that the accident was a contributing factor to the death or bodily injury (even if it was one of many factors), we sometimes tell the financial business to pay some of the claim. We are likely to recommend a proportionate payment reflecting the general contribution that the accident (as opposed to the other factors) made to the death or bodily injury.
what if the accident brought forward the effects of, or worsened, an existing disability?
In some cases:
the accident accelerated the effects of a condition that the consumer already had; and
the existing condition meant that they would have died or suffered disability at some point in the future, even if the accident had not happened.
For example, a consumer might suffer with arthritis which would have caused permanent total disablement within ten years. They then had an accident which brought forward the effects, to the extent they immediately became permanently and totally disabled.
Some policies do allow for proportionate payments in these circumstances. But even when they don’t, depending on the circumstances, we may tell the financial business to pay the claim on a proportionate basis.
Similarly, if an accident worsened an existing disability, depending on the circumstances, we may decide that the consumer is entitled to some benefit. In these cases, we will usually require clear evidence that the accident did increase the consumer’s level of disability. We generally do not tell the financial business to pay the full amount of benefit in cases like these – instead, we may tell it to pay a proportion of the benefit.
was an exclusion clause applied unreasonably?
The main exclusions usually included in personal accident policies are that the consumer’s claim will fail if:
the death or bodily injury was due to the consumption of alcohol and/or drugs;
the death or bodily injury resulted from a deliberate self-inflicted injury or the consumer recklessly exposing themselves to danger; or
the death resulted from suicide.
The wording and effect of these exclusions will vary between policies so we will always carefully examine the wording of the policy.
Many policies will also exclude claims for death or bodily injury resulting from activities such as driving a vehicle with fewer than four wheels, diving, mountaineering, rock or cliff climbing, pot-holing, parachuting, professional sports, boxing, racing and flying when not a fare-paying passenger.
Exclusions for various categories of war and invasion will also generally apply, as will exclusions for claims arising as a result of duties in the armed forces (although specialist forces personnel policies are available).
In each case, it is up to the financial business to prove on the balance of probabilities that the exclusion applies.
the alcohol and/or drugs exclusion clause
Most
personal accident policies contain an exclusion clause so that if the death or bodily injury is caused by alcohol and/or drugs, benefit is not payable. Again, policy wordings differ and we will always check to see what the policy actually excludes.
There is an important difference between an accident occurring after someone has consumed alcohol and/or drugs, and an accident being caused by alcohol and/or drugs.
We will expect the financial business to show that it is more likely than not that the consumption of alcohol and/or drugs caused the accident (or failure to escape its consequences).
We will also look at:
whether the consumer anticipated the death or bodily injury. If not:
whether the death or bodily injury could reasonably have been anticipated, meaning that the consumer ought to have anticipated it.
If, for example, the consumer was run over because they were lying down in the road while drunk, it may be that death or bodily injury could reasonably have been anticipated as a result of the action.
If, on the other hand, the consumer was hit by a speeding car while crossing the road when drunk, we are less likely to decide that they anticipated, or could reasonably have anticipated, that death or bodily injury would occur. The accident probably would have happened whether or not the consumer was under the influence of alcohol – and so it is unlikely that the exclusion clause would apply.
the deliberate self-inflicted injury/reckless exposure to danger-exclusion clause
Some personal accident policies contain an exclusion clause, so that if the death or bodily injury resulted from a deliberate self-inflicted injury or reckless exposure to danger, benefit is not payable. Some policies instead refer to “needless exposure to peril” or “exposure to exceptional danger”.
The main issue that arises in these cases is at what point an action becomes a “reckless exposure to danger”. We will carefully consider the policy terms, examine the circumstances of the case and take a common sense approach in reaching our conclusion.
For example, some might consider cycling without a helmet a “reckless exposure to danger”, but it is a part of ordinary life. In contrast, to argue that base-jumping is not “reckless exposure to danger” would be difficult. But many of the cases that we see are less clear cut. For example, is quad biking a “reckless exposure to danger” and does it matter if the consumer was wearing a helmet or was on private land?
the suicide exclusion clause
Where the financial business turns down a claim because it believes that the consumer committed suicide, we will decide the case on the balance of probabilities. It will be for the financial business to show that suicide was the more likely cause of death.
Coroners have to be satisfied beyond reasonable doubt before they can record a verdict of suicide. If the coroner returns a verdict of suicide, we will decide that the death was not accidental. If the coroner is not satisfied beyond reasonable doubt, they have the option to record an open verdict.
Because we decide what happened on the balance of probabilities (which requires less certainty), it is still open to us in open verdict cases to decide that the death was not accidental. But we will attach significant weight to the coroner’s findings into the cause of death.
is the consumer sufficiently disabled?
When defining the circumstances when permanent total disability benefit will be paid,
personal accident policies usually use one of the following criteria:
the consumer is totally unable to perform their own occupation;
the consumer is totally unable to perform any occupation for which they are suited (because of their education, training or experience); or
the consumer is totally unable to perform any occupation whatsoever.
When the consumer has a policy that refers to them being prevented from carrying on “any occupation whatsoever”, we generally do not consider that it is fair and reasonable to limit benefits to those rare situations where the consumer is completely unable to carry on any occupation whatsoever. Unless we are satisfied that the restrictive nature of the criterion was clearly brought to the consumer’s attention at the outset, we usually interpret the provision to mean “any suited occupation” by reference to the consumer’s education, training, experience etc.
putting things right
Personal accident policies are "non-indemnity" insurance contracts. The aim is not to return the consumer to the position that they were in before the accident. Instead, they simply pay financial benefit in cases of death or bodily injury where the policy terms are satisfied. They do not compensate for loss of earnings or incapacity from working. Because of this, there is no limit to the total benefit that can be claimed by the consumer – that is, they can normally claim for the same injury under multiple policies. But there may be restrictions if the policies are with the same insurer.
If a disability is defined in the table of benefits included in the policy – and the terms of the policy are met – then benefit is payable. The table of benefits will vary between policies. If there is any disagreement about which category the consumer falls into, we will review the medical evidence and decide what is fair and reasonable in the specific circumstances of that case.
when is a proportion of benefit more appropriate than the full amount? We may decide that it is fair and reasonable for the financial business to pay a proportion of the benefit in circumstances that do not warrant payment of the full benefit. These cases include:
- where the death or bodily injury was not solely as a result of the accident because there were other factors involved.
In general we decide what proportion of the death or bodily injury, can reasonably be considered to be related to the accident – and we then tell the financial business to pay the benefit accordingly. If, for example, the medical evidence shows the accident caused only 25% of the injury (with the other 75% due to a degenerative condition), we may tell the financial business to pay 25% of the benefit.
- where the accident brought forward the effects of an existing disability.
Our approach is to assess the available medical about about how many years the death or bodily injury was brought forward by the accident. We generally then tell the financial business to pay a proportion of the benefit in line with this assessment. If, for example, the consumer’s total working life (what it would have been in the absence of the accident) is shortened by 10 years from 40 to 30 years, we may tell the financial business to pay 25% of the benefit.
- where the accident worsened an existing disability.
Our approach is to assess the available medical opinion about what proportion of the disability is attributable to the accident. We generally then tell the financial business to pay a proportion of the benefit in line with this assessment. If, for example, the medical opinion indicates that 25% of the disability is attributable to the accident, we may tell the financial business to pay 25% of the benefit.
- where the consumer has a permanent disability but is not totally disabled
Where a consumer suffers serious functional impairment as a result of an accident (although strictly speaking the impairment is not “total” and there is some residual function), we may consider it fair and reasonable for a proportionate benefit to be paid. We will consider whether, in all the circumstances, the consumer had a reasonable expectation that the policy would cover them if an accident brought about a life-changing disability. This is in line with the fair and reasonable approach taken by a large section of the insurance sector to such claims. We will assess specialist medical opinion about the extent of the consumer's disability and use any available guides and official calculators to determine what proportion of benefit, if any, is payable.
- where the consumer has suffered only a partial disability and that disability was only partially caused by an accident
For example, a consumer has an accident which results in 80% loss of use of a shoulder, but only 50% of this loss was directly caused by the accident (the remainder was due to an underlying condition). In this case, we may tell the financial business to pay 50% of 80% of the relevant benefit – if that is fair and reasonable in all the circumstances.
interest
Where the consumer has been deprived of money because the financial business wrongly turned down their claim, we will usually tell the business to pay compensation at our normal rate of
8% per year simple.
We see many cases where the claim under the policy is delayed. For example, in claims for accidental death, the estate may not be aware that there is a policy in place. As a result, the interest is generally payable from the date the claim would have been accepted, rather than from the date of the death or bodily injury. This is to reflect the fact that a financial business cannot accept a claim of which it is not aware.
compensation for distress, inconvenience or other non-financial loss In some cases we may decide to tell the business to pay
compensation for distress, inconvenience or other non-financial loss that it has caused.
was the policy mis-sold?
There are several reasons why consumers complain that policies were mis-sold:
- the consumer did not understand the nature of the policy they were applying for;
- the consumer thought the policy would provide benefits in circumstances other than when it does; or
- the consumer did not apply for the policy at all (for example, when sold over the phone in conjunction with another product).
In relation to personal accident policies, the most common misunderstandings of terms in the cases we see are:
the consumer did not realise their policy does not cover them for illness; and
the consumer did not realise that an accident has to cause death or bodily injury in order for benefit to be payable.
Complaints about mis-selling generally against the seller who may, or may not, represent the insurer directly. The seller has an obligation to ensure that the policy is suitable for the consumer and that it is adequately explained to them.
When considering these complaints about mis-selling, we will examine the evidence available about the sale.
If the pre-sale and/or policy documentation is unclear about the cover provided, the consumer’s complaint would normally be against the insurer as the provider of the documentation. When considering these complaints, we will examine all of the documentation provided, to see whether it made clear what was covered by the policy and whether it highlighted any unusual limitations or exclusions.
Sometimes income protection policies require benefits under other disability insurance policies to be deducted from any income protection benefit payable. If we decide that the policy terms clearly allow the benefit from a
personal accident policy to be deducted in this way, then there may be a potential mis-sale – if this significant limitation of cover was not made clear. In these cases, we will look at the sale of each policy, to see whether the potential impact of having both insurances policies was explained.
compensation If we decide that a policy was mis-sold, we will normally say that there should be a refund of all of the premiums the consumer has paid plus interest of
8% simple per year. We will also consider whether a payment of
compensation for distress and inconvenience is appropriate.
But if we decide that the exclusion was unfair or unusual – and that it was not brought to the consumer’s attention – or that the consumer would have been able to obtain a policy elsewhere which would have covered their claim, then we may tell the business to pay for the claim as if the restriction was not part of the policy terms.
Similarly, if we decide that the mis-sale meant the consumer was entitled to rely on statements and representations made by the seller, then we may decide that
compensation should be paid either for
distress and inconvenience or for the full amount of the consumer’s claim under the policy.
Related articles:
Financial advisor for blended family
Get Cash for Structured Settlement
