Material Facts Group Protection Schemes 

Background

There is a requirement to disclose material facts when the rates and terms for group protection scheme are being set. The requirement to disclose is set in Legislation – The Insurance Act 2015.

Full details of The Insurance Act 2015 can be found here: https://www.legislation.gov.uk/ukpga/2015/4/contents/enacted. Ultimately an insured is responsible for fulfilling the requirements.

 

Group Life and Group Income Protection Schemes

The following is intended to act as a guide to application of the requirements of The Insurance Act 2015 for the purposes of group protection schemes. 

·An individual should be disclosed as a material fact if they are to be covered under a group protection scheme, and as a result of either illness or injury has led to an employee:

  • working reduced hours (not contracted)
  • having modifications applied to either the duties they perform or the place of their work (not contracted)
  • working against doctors’ advice
  • not working at all as a result of illness or injury for a period of 90 days or more

 

Also, an individual to be covered under a group protection scheme with a serious illness is to be disclosed as a material fact. Examples of serious illness includes, but is not limited to:

  • Terminal illness, where life expectancy is less than 12 months
  • Cancer
  • Heart Attack
  • Stroke

 

All such individuals should be disclosed, regardless of whether or not group protection claims have been submitted for them and regardless of whether they are actively at work or not.

The Insurance Act 2015 stipulates that an insured ought to know what should reasonably be revealed by a reasonable search of information available to the insured (whether the search is conducted by making enquiries or by any other means).  

For the purposes of fulfilling the serious illness disclosure requirement:

  • A reasonable expectation would be for the employer to disclose information known to:  
  1. HR colleagues as a result of their dealings with line managers and employees.
  2. Them, in their role as policyholder of other group protection arrangements such as Group Income Protection and Critical Illness, as a result of claims related activity.
  • It would not be reasonable to expect an employer to approach all of their employees and make enquiries in respect of their health.  

 

For the purposes of fulfilling the disclosure requirement in respect of an individual that is either working reduced hours, had modifications applied, is working against doctors’ advice or not working at all, for a period of 90 days or more as a result of illness or injury, a reasonable expectation is that the employer would:

  • Check absence reporting systems
  • Make enquiries with HR colleagues
  • Consider what is known as a result of claims activity on other group protection arrangements, such as Critical Illness
  • If the situation is known, insurers will expect to have declared to them details of any individuals who are  self-managing conditions, through hybrid / home working arrangements.
  • Consider those that might be on informal working arrangements, whereby they are receiving full pay and not have had a contract amendment, but actually only be working in a reduced capacity and make enquiries where that could reasonably be likely.

 

Critical Illness Schemes

Critical illness benefits are provided using a Pre-Existing and Related Conditions clause, which means insurers will not ask about a member’s medical history at the inception of cover.

The Pre-Existing and Related Conditions clause will be checked by the insurer when any claim is submitted to them. Full details of how this is applied can be found in the scheme documentation.

 

General

It would not be reasonable to expect an employer to approach all of their employees and make enquiries in respect of their health.

Material facts are not limited to health conditions; all disclosures should be explicit including those relating to occupations, travel to locations that are advised against on the Foreign, Commonwealth & Development

Office website and employees that are members of the reserve forces. For example, if anyone performs hazardous tasks, is involved with the handling of hazardous substances, works at heights or with dangerous machinery full details should be provided. This list of examples is not exhaustive.

Not disclosing a material fact can result in additional premiums being charged, claims not being paid or in a worst case scenario a policy being voided.

MMB can provide guidance and assistance in respect of disclosures being fulfilled, where requested, including providing information that MMB might hold as a result of undertaking work for a client.