uberrima fides

during my monthly life insurance training class yesterday, one of my advisors raised a concern on his existing client, a family who incepted a shield plan plus rider some time back, but not from him.

what is my advisor's concern?

during a very recent meeting with his client, the head of the household (in this case, the husband) disclosed that at the time of application of their shield plan plus rider, his cholesterol levels were not in the normal or healthy range and his wife had raised blood pressure or hypertension which were omitted in the application form.

my comments:

without any hesitation, my advice is for my advisor to go back quickly to the family and explain that all insurance contracts are based on the principle of uberrima fides* or utmost good faith and the other on insurability.

* taken from wikipedia

Uberrima fides (sometimes seen in its genitive form uberrimae fidei) is a Latin phrase meaning "utmost good faith" (literally, "most abundant faith"). It is the name of a legal doctrine which governs insurance contracts. This means that all parties to an insurance contract must deal in good faith, making a full declaration of all material facts in the insurance proposal.

and on this, my advisor has to instruct his client, both the husband and the wife to make a declaration of their health status to the insurer without delay.

the point is, the insurance contract at that time, was underwritten without full disclosure. and what this means is that the warning prominently displayed in all insurance forms namely;

warning:

"pursuant to section 25(5) of the insurance act (cap 42), you are to disclose in this application form fully and faithfully all facts which u know or ought to know, otherwise the insurance effected may be void."

may lead to the insurance contract being void and no benefits shall be payable by the insurer.

which i why i will not and have not compromised on full disclosure when dealing with the person/s in front of me, even if it means losing the business which has happened a number of times in my 14 years in the financial industry.