Income protection products cause more disputes

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The Financial Ombudsman Service (FOS) has reported an increase in life insurance disputes, while dispute levels across most other areas decreased.

The overall number of life insurance disputes accepted increased by 16% to 1,043 compared with 903 in 2011-2012. A rise in income protection product disputes was the main reason for the increase.

Sixty percent of income protection disputes were related to a financial service provider’s (FSP) decision – mostly the decision to deny a claim. Many applicants said that the FSP denied the claim by asking for information the applicant was unable to provide.

Disputes over claim amounts were also common in income protection insurance disputes, as many people complained that they weren’t paid the correct amount.

There were also complaints about unfair policies. In one case, the applicant realised she could only receive a maximum of $5,000 for her funeral plan although she had already paid $6,000 for the policy and continued to pay $60 per month.

A FOS spokesperson said that the tighter market is the most likely reason for the increase in numbers.

“When times are tough you’re more likely to follow something up,” she said. However, it is important to note that the total numbers of life insurance disputes still only make up around 4% of FOS’ total disputes received.

TPD insurance was an area of high disputes within the non-income stream risk products. Denial of TPD claims was the most common reason that people complained about the product, followed by complaints about a delay in claim handling.

FOS accepted 99 disputes relating to term life insurance products in 2012-2013. Some of the most common issues were: denial of claim, failure to follow instructions, incorrect premiums and cancellation of policies.