The Financial Ombudsman Service believes there is “a substantial carve out” within the FSC code that is preventing a proper industry standard around medical definitions.
The FOS said in its submission to the life insurance inquiry that section 3.2 of the FSC code regarding medical definitions applies only to definitions in ‘on-sale’ policies.
“This limitation amounts to a substantial ‘carve out’ from the code and we consider that such carve outs detract from the effectiveness of a code,” the submission said.
“We suggest consideration be given to extending section 3.2 so that it applies to policies other than ‘on-sale’ policies.”
The FOS also said disputes about life insurance claims often revolve around industry interpretations of medical definitions that are “unclear”.
It also raised its concerns that consumers may be misled to expect that certain events or medical conditions are covered by a policy when they are not.
“It is our experience that disputes often arise as a result of the application and interpretation of policy definitions where the definition is overly restrictive, ambiguous, unclear in its meaning, outdated, has not kept pace with current clinical, medical or diagnostic tools and where community expectations about what the definition will cover is different to the elements in the definition that must be satisfied in order for a claim to be successful,” the ombudsman said.