It pays not to tell lies to insurers

 

In any job, industry or profession, if you’re around long enough, you get to know the lies that are told during a transaction.

For example … teachers and students, particularly regarding homework (which includes my little DebtBoy, bless him, who has been caught out, thanks to parent/teacher conferences).

Defence lawyers and their clients, journalists and contacts. And this list wouldn’t mean anything if we didn’t also mention … voters and politicians! We just expect lies. And, sadly, there don’t seem to be sufficient penalties.

In the real estate industry, a regular saying of agents is: “buyers are liars”. Potential buyers never tell agents how deep their pockets are, or what their maximum spending limit is for a property.

In my opinion, for good reason! If you told an agent you could go up to $620,000 for a property, do you think they would let you buy it with your first offer of $570,000?

Some lies are accepted. Some lies are little white ones. Some are known as lies only to the person who told them.

But some of them are simply such big juicy lies – porky pies dripping in sauce – that it is hard to pass over at first or second glance.

Can I let you in on a secret, when it comes to lies and insurance?

Insurance companies aren’t stupid.

They really aren’t.

And telling lies to insurers, particularly during an application, is a really, really risky business. Dumb.

Insurers want to take on new clients. They really do. That’s their business. The more clients whose insurance premiums they are able to accept, the more more money they will generally make.

But they also need to know what risk they are taking on, so they can manage the pool of risk.

An insurer, clearly, does not want to take on a large number of clients who have recently suffered heart attacks, cancers or strokes. If they survived the first one, they are, sadly, less likely to survive the next one.

But people who are also high risk include those with high blood pressure, diabetes, or, sadly, mental health conditions, including depression, anxiety and stress.

It’s a bit hard to “lie” about having a ticker that has faltered, that you’ve recently been to hospital for a serious condition, or that you’ve been seeking treatment for a serious, as-yet unknown, condition. (Let me assure you that “as-yet unknown” conditions scare insurers the most.)

When an insurer takes you on, they are generally accepting to take on a risk for a very long period of time, often decades.

Over hundreds of years of offering insurance, they have built contracts that are designed to catch out, let’s be honest, liars.

Let me explain how.

This often doesn’t happen until such time as you are going to make a claim. This could be as a result of your death (at which point, you’re not around to defend yourself) or when your health is at an all-time low and you really don’t want to be answering questions about your honesty.

Australia has a wonderful healthcare system, which includes two largely loved systems. One is called Medicare. The other one is called the Pharmaceutical Benefits Scheme (PBS).

Medicare and PBS records go back to the early 80s. Pretty much any drug you have ever been prescribed … any medico you have ever seen … has been recorded.

When it comes to making an insurance claim – regarding life, total and permanent disability, trauma or income protection – insurers have a right to ask these institutions for your full medical treatment and drug treatment history. They put it in their contracts that you signed.

If you have a blood test that showed up that you once used illicit drugs, that you sought treatment for a bad back with a chiro or physio or another health-care professional, were given drugs for a dodgy ticker or high blood pressure, an unusual blood-test result, were emotionally distressed because of a particular issue … then you need to understand that there is a reasonable chance that this has been recorded.

Either with your GP. Or specialist. Or Medicare. Or on the PBS.

Not acknowledging your actual health history can lead to claims being denied, even after years of paying premiums.

If, however, you are honest about your fragile back, your sunspots or melanomas, your smoker status … you might pay extra for your insurance, or even be told that you won’t be covered by a particular insurer.

But those little lies won’t come back to haunt you when you’re most hoping that you’ll be covered … when you’re really in need of financial support.

Bruce Brammall is the author of and is both a financial adviser and mortgage broker. E: bruce@brucebrammallfinancial.com.au.