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Tuesday 21 December 1999
[Sir Alan Haselhurst in the Chair]
Permanent Health Insurance
Motion made, and Question proposed, That the sitting be now adjourned.--[Mr. Touhig.]
Mr. Clive Efford (Eltham): This is the first time that I have had the opportunity to speak in the new surroundings of Westminster Hall. I welcome the fact that I can lay papers in front of me and take a drink during a speech. I hope that holding the debate in this Chamber will not detract from the argument of those suffering at the hands and sharp practices of some permanent health insurers.
My purpose is to highlight the problems of some people who have contracted chronic illnesses and subsequently found that their insurance policies, which should have covered them for loss of income, have not been honoured. According to the 1996 Office of Fair Trading report, permanent health insurance is an insurance policy to replace people's income should they become unable to do the job for which they are insured. Policies usually cover up to 75 per cent. of an individual's salary until the time that the individual loses employment, but payments are less any state benefits to which he or she is entitled. They do not cover any payments for disability.
When people are unable to continue work due to chronic illness, the problems can be more complex than first imagined. People who have permanent health insurance through their employers feel safe in the knowledge that such an eventuality, hitherto considered unlikely, is covered. However, I have discovered that the illness can often be the least of an individual's worries.
The 1996 OFT report was set up because
"the various health insurance products appeared to be complex, with sales often made to vulnerable consumers, and there appeared to be substantial scope for misunderstanding and mis-selling". The report dealt mainly with permanent health insurance taken out by individuals, who have recourse to the services of an ombudsman. It did not deal with the group insurance policies taken out by employers. The difference between the policies is that one has access to arbitration.
In the report, the OFT states that
"it should be borne in mind that some 60 per cent. of those who are covered are protected by group policies--and the most vociferous of disappointed claimants fall almost exclusively in this category." The problems that it highlighted are: difficulty in making claims, probably due to ill health; difficulty obtaining redress; and inadequate knowledge of the terms and conditions of the policy. There is an apparent lack of regulation in that part of the insurance industry that leaves a small but significant number of people vulnerable to sharp practices by unscrupulous insurance companies. In many instances, those people suffer the
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pain and anxiety of having recently been diagnosed as suffering from chronic illnesses that have forced them to give up employment.
I became aware of the issue through the case of my constituent, Mrs. Doreen Buckland. She is insured with the largest insurance company in the United Kingdom, UNUM, which mainly practises in the group permanent health insurance field. Only 10 per cent. of its clients are individual private health insurance customers. In the booklet that UNUM gives to its claimants regarding its disability counsellors, it describes itself as follows:
"Over the years UNUM has firmly established a position throughout the United Kingdom as market leader in Group Long Term Disability Insurance.
Its parent company, UNUM Corporation, an American specialist insurance company was established in 1848 and now has assets of $15.5 billion.
The combined strength of the two major transatlantic forces in this field enables UNUM to provide clients with products and services of the highest standard and confirms UNUM as the world leader in disability insurance."
Mrs. Buckland suffers from lupus disease, which has 30,000 sufferers in this country, 90 per cent. of whomare women. Unlike other illnesses such as myalgic encephalomyelitis, which also relates to this subject and to which I think other hon. Members will refer, it is a certified disease that can be identified and clearly diagnosed. She had been ill for seven to eight years and was finally diagnosed as suffering from lupus disease in 1997. That was confirmed in a letter from a consultant rheumatologist at Queen Mary's hospital, Sidcup, on 3 December 1997. The company that employed her submitted a claim to UNUM in February 1998. Under the terms of the policy, she should have received payment from UNUM in the following March, but instead she was visited by a UNUM counsellor who, in her words,
"was not interested in my problems but was merely looking for reasons for UNUM to reject my claim".
In April 1998, a letter to UNUM from Dr. Timothy Godfrey, a consultant rheumatologist at Guy's hopsital, set out the condition from which Mrs. Buckland was suffering and confirmed it as systemic lupus erythematosus. In May 1998, Mrs. Buckland was granted disability living allowance. Later that month, UNUM sent a letter declining her benefit and any liability under the terms of the contract.
On 29 May 1998, immediately after receiving the letter, Mrs. Buckland's employer wrote to UNUM outlining its concerns about the decision and the disregard for her medical condition. The employer then appointed an independent professional insurance marketing services company to prepare an appeal. A visit was made to UNUM, which was dealt with by two of its representatives. Mr. Williams, an agent of the consultants appointed by Mrs. Buckland's employers, said:
"We had hoped that discussion of the claim and the effects of Mrs. Buckland's illness would result in reconsideration, but it was obvious that UNUM's claims manager had no authority. It was also clear that" the two representatives--I shall not name them--knew little about lupus disease. Mr. Williams continued:
"We were advised that Mrs. Buckland would have to return to work and become ill again before the claim could be considered. That apparently UNUM do not think she is ill enough already."
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I am sure that hon. Members will recognise such practices.
The appeal was supported again by Dr. Godfrey, who quoted from "Understanding Lupus", a book by a leading authority on the subject, his colleague Dr. Hughes. The appeal was also supported by a certified counsellor from Lupus UK, the consultant at Queen Mary's hospital, Sidcup, Dr. Bamji, and by a letter from Mrs. Buckland's general practitioner regarding her mental and physical fatigue. In the letter from the consultants contracted by Mrs. Buckland's employers to deal with the appeal, Mr. Williams quotes Sir Richard Baylis, an eminent endocrinologist with experience of cases involving the claims of lupus sufferers, many of whom have also been denied benefits by insurance companies. Sir Richard Baylis offered his assistance and suggested that Dr. Graham Hughes, who wrote the book "Understanding Lupus", would provide evidence.
Subsequently, in August 1998, UNUM requested that Dr. Godfrey prepare a report on the effects of stress on lupus sufferers. Dr. Godfrey responded by saying that he would want payment to undertake such major research and that significant scientific evidence already confirmed such effects. In September 1998, the Department of Social Security wrote to Mrs. Buckland, apparently satisfied with her condition, and confirmed that she no longer needed to provide medical certificates to receive incapacity benefit. That showed the difference between the treatment of Mrs. Buckland by the state and her treatment by the company, which was trying to use every possible tactic to deny her benefit.
On 9 September 1998, UNUM rejected Mrs. Buckland's appeal because her lupus was in remission. That was despite the medical opinion that returning to work would make Mrs. Buckland's lupus worse and despite the fact that stopping work had halted the deterioration in her condition. Under the conditions of the contract with her employer, Mrs. Buckland should have been receiving benefit. In October 1998, UNUM sent Mrs. Buckland to a consultant psychiatrist, Mr. George Reseck of Harley street, who started the interview by asking her whether she was happy. He then asked her what books she read and concluded by sympathising with her in her "battle" with UNUM.
In January 1999, UNUM rejected Mrs. Buckland's appeal and again gave remission as the reason for that rejection. It agreed to make a payment, and required Mrs. Buckland to undergo the psychiatrist's recommended treatment. Later that month, Mrs. Buckland visited her GP who had received a letter from UNUM recommending that she be sent for therapy and given anti-depressant medication. Mrs. Buckland's GP rejected the need for anti-depressants and stressed that she had extreme reactions to any medication due to her lupus.
I asked my constituent to describe the effects of her condition. She replied that her symptoms could change from hour to hour and from day to day. She said that it could result in aching joints, sudden seizures and loss of the use of her hands, chronic fatigue which could last for several weeks, numerous severe headaches each week,
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pain when walking up slight inclines and the constant feeling of suffering. She described the pains as those that one experiences when suffering a severe dose of flu. Mrs. Buckland said:
"I did not expect to become too ill to work but I felt secure by the insurance protection my employer gave its employees. My life has been completely changed by my illness and everything I have worked so hard for will now be lost because of the unbelievable treatment I have received from UNUM."
So extreme are the practices of that company that a UNUM support group has been set up for people in a similar situation to that of Mrs. Buckland. It has 250 members and estimates that 4,000 people are in similar situations throughout the country. It is not only people in the United Kingdom who are suffering such problems. There is documented evidence from throughout the United States, where UNUM is the largest company that provides such insurance cover. There is evidence of such cases from Australia and Canada, and I have no doubt that people in other countries also suffer as a result of the sharp practices of UNUM and similar companies.
Mrs. Buckland has said that she is likely to lose everything that she has built her life around and I can quote details of a similar situation experienced by a person in America. He said:
"Next month, my wife, my daughter and I will likely see our home sold on the courthouse steps." That quote from someone across the Atlantic almost mirrors exactly the words used by Mrs. Buckland when describing her condition. It is time that we took action to close such a loophole. I appreciate that Adjournment debates cannot be used to call for legislation, but clearly such a problem, albeit for a small, but not insignificant, number of people, must be addressed. Evidence shows that companies are actively exploiting the loophole. Contracts that are held with them, not the individuals, leave it to the company to take action to ensure that the individual is paid benefit. If the company does not take action on behalf of its employee, the only course of action left is to risk financial ruin by fighting expensive court cases against companies that sit back and say, "Sue us, if you dare."
It is our duty to deal with the issue and not leave individuals who are at their most vulnerable to the mercies of unscrupulous companies. There is evidence of sharp practice and the constant moving of goal posts. Each time a medical report was producted to support Mrs. Buckland's case, for example, the slightest opportunity for the company to claim that there was no definite proof that her illness prevented her from returning to work was used in the face of overwhelming medical opinion. When faced with a court case, such companies often settle it before it is brought before a judge. Medical opinion of experts from whom the companies claim to have obtained evidence would be subject to cross-examination and companies could face exposure of fraudulent activities. All claimants are sent to a psychiatrist, whose diagnosis is subject to questionable decisions. One of the side effects of Mrs. Buckland's disease is that she cannot use medication.The fact that she is not taking medication is used by UNUM as evidence that she cannot be suffering. It has moved the goal posts yet again.
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The Government must take action. Perhaps the Financial Services and Markets Bill will offer them the opportunity to do so. I conclude my remarks by referring to Mrs. Buckland's description of the dreadful stress that has been placed on her by UNUM at a time when she is at her lowest and has lost all feeling of self-worth. She considers that she has been accused of trying to get something for nothing and feels that every aspect of her life is under investigation. It is time that the issue was brought to an end.
Sir Robert Smith (West Aberdeenshire and Kincardine): I congratulate the hon. Member for Eltham (Mr. Efford) on securing a debate on this issue and on explaining the case of his constituent, Mrs. Buckland, so well. He finished on the point that it is an individual who is being affected by the policy and the way in which it is handled, and we should remember that. At a time when people are at their lowest, they have to confront the added hurdle of the safety net that they thought that they had turning into a nightmare of legal action.
I was asked by a constituent to take part in this debate when he heard that it was happening. He took the company, which used to be called Nel Permanent Health Insurance, to court. His policy is now with UNUM. The case was not settled on the court steps; the court had to deal with it. Mr. Porter was a diver in the North sea when he developed angina. The insurance company said that it should not continue to pay him because he had failed to mitigate his illness by not having a heart bypass operation. Even with the operation, he would still be unable to dive, and, as was pointed out by the sheriff, a person has to decide whether to subject himself to the risk of major heart surgery, and is entitled to do that for himself.
The insurance company lost on that argument. The company also claimed that the claimant was able to do clerical work and had been offered a clerical job, but could produce no evidence of that fact. It failed in the court on both grounds. I understand from Mr. Porter that his case is now used by others to highlight the fact that the purpose of such a policy is to protect someone against being unable to carry out the employment for which he is trained and that he is capable of doing. Mr. Porter found it an extremely stressful experience, and I hope that others will not have to go through such court procedure.
Another constituent has the more general problem of having a policy that is a group policy in the name of a past employer, with subscriptions having been paid as a deduction from earnings. There is a problem about the legal relationship with the insurance company and how to claim benefit for a back problem, which has put my constituent out of work as a health carer in a nursing home. Both constituents paid towards their insurance policies, believing that they had a security net, but when they needed the safety net, it was far more difficult to make use of it than they had been led to believe.
The Minister needs to consider carefully how to regulate the industry to maintain confidence. Many people are insured with insurance companies, but they have limited professional experience. They take out contracts with a large company, which obviously has great experience of claims. Individuals, hopefully, go
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through life without having, or rarely having, to make a claim, so they cannot be treated as having the same legal training or professional expertise as the company with which they have entered into a contract.
There is a duty on the insured to be honest and forthright with the insurer, but, in many ways, the insurer should have a duty to consider the needs of the insured and to treat him fairly. That balance seems to be wrong at present. The insurer knows that the insured is at his weakest when making a claim. There is always a problem for claimants, but it is worse for those claiming from their permanent health insurance policies. Their physical well-being is not what it should be; that is why they are out of work and have lost their employment. They are not at their fittest to tackle making a claim.
Those of us who believe in markets and the freedom of the individual cannot remove the problem completely, but we can try to ensure that there is an effective system of regulation and a level playing field. People must have access to the ombudsman and the ability to sort out disputes on policies. The wording of such policies should be unambiguous, so that people know what they are taking on and what risks are covered. Clearly, if a low premium is paid, not much future risk will be covered. That must be made clear to people. They need to know the level of risk that is being covered and they must understand the contract that they are entering into.
Confidence is important to all those involved in the market. Those who want to provide good and effective policies need to know that the market is well regulated and fair, so that the product is not undermined by the experiences of others. If people do not have confidence in permanent health insurance, the whole market suffers. If we want people to make financial provision for their future, we must ensure that the markets are properly regulated. Permanent health insurance must be understandable and seen to be fair, so that people will have the confidence to take out policies.
I urge the Minister to approach these issues carefully and with an open mind, to see what she can do to ensure that, in future, people do not have to go through a court case to settle problems. They need safe and effective access to permanent health insurance.
Charlotte Atkins (Staffordshire, Moorlands): I congratulate my hon. Friend the Member for Eltham (Mr. Efford) on securing this important debate, and I am sure that note will be taken of it, even though it is taking place in Westminster Hall rather than on the Floor of the House.
Like other hon. Members, I heard of the antics of UNUM from a constituent--Audrey Gregory, whose husband Keith left work because of ill health in 1993. Keith Gregory worked for Scapa, a company dealing with industrial filters. Sadly, he has been unable to work for six years because he suffers from angina, asthma, diabetes, high blood pressure and osteoporosis. Dr. Eardley, my constituent's well-respected GP, concluded that Mr. Gregory would never be well enough to work again, but would have to rely on benefits. UNUM disputed the diagnosis. Although Mr. Gregory was accepted as being sufficiently disabled to claim disability living allowance, UNUM would not
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accept his level of disablement. The company did not examine him; it even refused to meet him when he requested it to do so.
Permanent health insurance cover, through UNUM, was part of Keith Gregory's employment contract, but he was never issued with details of the scheme. In fact, Mr. Gregory discovered that he was not even the claimant; he was simply a third party. The company--Scapa--was responsible for making claims. On seeing a letter by accident, Mr. and Mrs. Gregory discovered that the company was busily doing a deal with UNUM behind their backs--agreeing to pay a fellow worker, but not to pay out to Mr. Gregory. He was to be left in the lurch. Mr. Gregory will hear today whether the company has done the right thing at last, and agreed to pay out--six and a half years after he was forced to give up work. It is an appalling story, but, as we have heard today, it is by no means unique.
Although UNUM is the United Kingdom's largest disability insurer, it has been involved in a series of claims disputes in Britain. It has just lost its court case against Rachel Wadsworth. In another UNUM case, Alison Whitby was declared unfit for work, as she was suffering from chronic fatigue syndrome. That was in March 1996. In February 1999, the bank for which she worked--Warburg Dillon Read--sent her forms to complete, in relation to a claim under UNUM's permanent health insurance. Despite overwhelming medical evidence, which showed that she was seriously ill, matters dragged on for Alison. UNUM even employed a private investigator to follow her.
In April 1998, Alison was informed that not only had UNUM turned down her claim under its permanent health insurance scheme, but the bank was terminating her employment. It was only through her union, which was not even recognised by the bank for negotiating purposes, that she found a satisfactory outcome. Her case was lodged with the employment tribunal, alleging unfair dismissal and breaches of the Disability Discrimination Act 1995 and the Sex Discrimination Act 1975. Eventually--surprise, surprise--the bank settled out of court.
UNUM is not the only culprit. Many companies have been handling claims in ways that have resulted in more people being denied payouts when, on all other criteria, they would assume that they had good grounds for success. Those companies expanded their operations on the back of the November 1993 Budget, when it became clear that invalidity benefit would be replaced by incapacity benefit. It was obvious that the amount of money going to the sick and disabled would be much reduced.
The clear message was that people would have to fend for themselves. That message did not go unheeded by the insurance companies. Lurid advertisements with graphic tables were designed to shock people into protecting themselves with long-term disability policies--individually and, increasingly, through employers. The then Secretary of State for Social Security, the right hon. Member for Hitchin and Harpenden (Mr. Lilley), invited UNUM's vice-president, Dr. John le Cascio, to help with the extensive training of doctors needed for the new all-work test. Those tough new tests were fundamental to the savings
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that the right hon Gentleman hoped to achieve. Dr. le Cascio was therefore helping to validate a scheme that was being exploited by UNUM to drum up business in the United Kingdom.
Those insurance policies are now being claimed against, and it is up to UNUM and the other companies to deliver on their promises. They must be made to honour their responsibilities as insurers. The lives of many people depend on it.
Mr. Anthony D. Wright (Great Yarmouth): I congratulate my hon. Friend the Member for Eltham (Mr. Efford) on securing this important debate. In my role as chairman of the all-party parliamentary group on myalgic encephalomyelitis, it has often been drawn to my attention that many people with chronic illnesses face problems in securing their right to the health insurance payments for which they have paid contributions. Indeed, the group intends to investigate the matter more thoroughly at its next meeting.
ME is a debilitating condition, the cause of which is still not known. As it is difficult to diagnose the illness, people suffering from it face prejudice from some corners of the medical profession. For many, that has a knock-on effect when it comes to claiming benefits and insurance payouts.
One of the most respected and renowned doctors in the field of ME is Dr. Betty Dowsett. She has advised a number of people with ME who have had difficulty in claiming sickness insurance. Dr. Dowsett ran a clinic for infectious diseases in south Essex; occasionally, during the first 20 years, she was asked by insurance companies to provide comprehensive medical reports on patients with ME, for which they usually offered a standard fee. However, from 1994 the procedure began to change. The comprehensive assessment was replaced with a pro forma offering two choices. The first was a good prognosis, indicating that the patient had been offered psychiatric assessment and recommended treatment, including cognitive behaviour therapy, graded exercise, and suitable drugs. The second choice was a poor prognosis, indicating that the patient believed that the illness had an organic basis and had not co-operated in psychiatric assessment or treatment. Patients were expected to fill out the pro forma themselves, although some of them asked Dr. Dowsett's advice.
I have seen a copy of that pro forma. It shows that insurance companies are prejudging the causes of and the treatments for ME before consensus has been reached in the medical profession. That is unfair to people with ME; they are often forced into undergoing therapy that is not proved to help, and that may even set them back. If they have been treated by an ME specialist who favours another method of diagnosis and treatment, they may find that their disability insurance payments cease.
According to Dr. Dowsett, it became increasingly common from 1997 for insurance schemes to refuse to pay retirement or sickness pay from company insurance schemes. She advised 17 patients between January 1997 and April 1998, of whom only three were fully successful in their claims. Several patients were forced to attend named psychiatric clinics and to receive cognitive therapy, graded exercise and psychoactive drugs. They were told that if they did not they would lose their pension rights.
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To show the scale of the problem, I shall cite two cases that have been brought to the attention of the all-party parliamentary group on ME. The first is that of David Little, who, from 1984, worked as a financial adviser with Allied Dunbar. In 1986, he took the precaution of protecting his income against the possibility of sickness or disability; he took out an insurance policy with Allied Dunbar that was underwritten without any exclusions. He became ill and eventually, in October 1996, he was diagnosed as having ME. He had already begun to manage his illness by taking plenty of rest, and in April 1997 he was able to return to work with the support of his colleagues. Disability payments were agreed on a proportionate basis while he was rehabilitating.
In December 1997, Mr. Little suffered a further relapse, and he has not been able to work at all since January 1998. At first, Allied Dunbar made full payments under Mr. Little's insurance. However, in July 1998, he was asked to attend an independent medical. The independent consultant concluded that Mr. Little was unlikely to be able to return to work full-time, but that he should be able to manage part-time work. The Benefits Agency subsequently asked Mr. Little to attend an all-work test, and the consultant confirmed that Mr. Little was not fit to do any work.
Meanwhile, Allied Dunbar disqualified Mr. Little's disability claim. The firm offered him a further six months' rehabilitation, which is thought to be fair and justifiable. Mr. Little duly complained to the Personal Investment Authority ombudsman, who requested a full report. The ombudsman recently turned down Mr. Little's appeal on the ground that ME might not exist as an illness and that, if it did exist, it was of a psychological nature and Mr. Little was therefore in need of psychotherapy.
However, that judgment ignored the in-depth assessment of Mr. Little's illness by Dr. Andrew Wright. Dr. Wright is renowned for his work on ME. He is a member of the chief medical officers' working group that is looking into the illness. Mr. Little was recently referred to a psychiatrist by his general practitioner in order to prove that he was not in need of psychiatric help. Anyone who campaigns on behalf of people with ME would, to say the least, be disappointed that such an unenlightened view of ME was still being applied by an organisation meant to provide an impartial hearing for appellants.
The small print of Mr. Little's insurance policy states that, in the case of full disability, payments will be made until the age of 60. Mr. Little is now 53, but he has received no payment for a year and a half. The policy also states that, if there is any doubt about the medical diagnosis of the disability, the insurance company will always fall on the side of the client. However, despite the conflicting medical evidence in Mr. Little's case, Allied Dunbar has failed to side with the client. Since the loss of his insurance benefits, Mr. Little has separated from his wife and family as a result of financial pressures, and he is on the verge of losing his home and the other material possessions for which he has worked. That is despite the fact that he took the precaution of insuring against such an eventuality as long ago as 1986.
The second case that I wish to highlight is that of Miss P. Kidd. Miss Kidd wrote to me a month ago, outlining a similar story. She was a partner in a firm of solicitors when she became ill with ME in 1991. She was
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eventually forced to give up work in September 1992. Her insurers, Swiss Life, paid her under the terms of a private health insurance policy from April 1993. She has been to a wide range of medics and complementary medical practitioners in a bid to cure her condition, but none has been able to help her. Indeed, Swiss Life's own medics have confirmed her condition.
Miss Kidd has continued to battle against her illness, which leaves her bedridden for much of the time. This year, however, Swiss Life has changed its attitude. It forced her to see a psychiatrist with known views on the causation of ME by threatening to stop her payments; but she has been refused sight of the psychiatrist's report. She was then subjected to a month's surveillance; it naturally caused her great fear to realise that she was being followed.
Swiss Life, which operates a group policy for the firm, refuses to communicate directly with Miss Kidd, although she remains a partner. The insurance company told her firm that it had evidence that her claim was false and requested a meeting with a representative at which Miss Kidd was not to be present. Miss Kidd believes that video evidence taken when she was under surveillance may be the basis of Swiss Life's case. Like many ME sufferers, Miss Kidd's condition fluctuates: when she feels well enough, she tries hard to be independent and take care of herself. She is afraid that the video may, on the surface, show her to be fit and able. However, anyone familiar with ME knows that a day's exertion may mean a week's relapse.
Miss Kidd is most troubled by the fact that she will be unable to represent herself when Swiss Life makes its claim to her firm. Should it withdraw Miss Kidd's benefits, she will be forced to fight the insurance company through the courts. That is a terrible prospect for someone suffering from ME, as the stress and exertion involved will undoubtedly lead to a deterioration.
What troubles me most about the cases that I have mentioned is not the fact that insurance companies question the legitimacy of the claims--that is their right and is no different from the Government's investigation of benefit claimants--but the manner in which they undertake those investigations. I have been contacted by Monica Dale, who runs Campaign Advice Support and Help--CASH--which helps people with ME facing problems with their private health insurers. She has told me that insurance companies take extreme measures when undertaking surveillance, such as camping outside people's houses.
Mrs. Dale believes that most insurance companies regard ME as a psychiatric illness and think that people suffering from it should undergo cognitive behavioural therapy. She believes that that treatment may help people with ME to manage their illness better, but that it is not a cure. The waiting list for the treatment is up to a year and only a few cognitive behaviour therapy treatment centres are aware of ME. Worst of all, many insurance companies cut off benefits while people are awaiting treatment, creating financial hardship for ME sufferers and their families.
The cases that have come to the attention of the all-party parliamentary group on ME in the past few months are only the tip of the iceberg. When faced with action by an insurance company, many people with ME
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may be too ill to fight and may just accept such treatment. I know that to be the case for many who have been denied disability benefits. Insurance companies that take unilateral decisions on the diagnosis and care of people suffering from ME--about the aetiology and treatment of which there is controversy--are, to say the very least, not following good practice. Insurance companies are not prepared to accept ME as a permanent illness. Unfortunately, however, for many people that is the reality. The fact that some are fortunate enough to recover and lead a normal life does not mean that that is possible for every ME patient.
For someone with ME, the most damaging feature is that stress may severely disrupt recovery; indeed, it may exacerbate the condition and cause regression. All those who contacted me about problems with their insurance companies have undergone terrible stress and their health has suffered accordingly. I urge insurance companies to look long and hard at their policies as well as their treatment of people with ME and other chronic illnesses. My hon. Friend the Member for Eltham will continue his campaign, and his efforts will have the support of the all-party parliamentary group on ME.
Dr. Peter Brand (Isle of Wight): I congatulate the hon. Member for Eltham (Mr. Efford) on securing an important debate in which I have an interest. I am grateful to the Minister for attending our debate; she will have plenty of time to respond.
Mention has been made of my constituent, Rachel Wadsworth, who successfully brought a case against UNUM. However, we should not concentrate purely on UNUM, although it seems to be especially accident-prone. The problem is that insurance companies are keen to make contracts to cover people, but fail to pay out. There is a slight difference between insuring a washing machine for on-going effectiveness and insuring people. A company that insures washing machines knows how reliable different makes are. There is probably little doubt about a machine that does not work and people have some idea how to mend it.
With humans, that is harder, as it is often difficult to know an individual's baseline. How fit is someone? What pre-existing maladies does he or she have? Some of those maladies may be known to the patient, but others may not. Insurance forms for washing machines set out a clear contract and one knows exactly what one is getting for one's money. However, some glossies--especially for group permanent medical insurance cover--do not make clear the benefits that people may get or under what circumstances. The signatories, however, clearly commit themselves or their firm to a weekly payment.
I am alarmed to hear from hon. Members that insurance companies can insist on a treatment set out by their medical assessors, who are doctors employed by them.
Mr. Efford : I agree with the hon. Gentleman. In the case of my constituent, Mrs. Buckland, one of UNUM's decisions was based on a medical report by someone who had never met her.
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Dr. Brand: That illustrates what a nonsense all this is. People have a right to choose medical advisers and those who treat their illness. They also have a right to accept advice and treatment, as my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir R. Smith) explained. They cannot be forced to accept a certain treatment, whether cardiac surgery or cognitive psychotherapy. If people are ill, they are ill. Clearly, an insurance company has the right to seek medical advice about the validity of a diagnosis. It may be kind and offer help by suggesting a certain treatment. It cannot, however, insist on that treatment being carried out by its own clinicians or others. That obviously leads to undesirable muddying of responsibilities.
I was interested to learn that UNUM has advised the Benefits Agency's medical division. That explains some of the unimpressive decisions made by doctors on behalf of the Benefits Agency. However, the most important point to bear in mind is that people are encouraged to take out cover. I support that as a former self-employed person, it would be irresponsible not to have cover. However, the contract that is signed must be transparent. We would like the Government to introduce some form of regulation so that insurance contractual arrangements are clear and open from the outset.
I get upset when people fill in forms committing them to a large on-going financial outlay without seeking medical advice. They do that to buy peace of mind. Insurance companies take on that risk without seeking medical reports. However, as soon as there is a hint of a claim, they contact any doctor they can find to discover whether there is an undisclosed previous condition which may allow them not to pay out. That clearly means that the playing field is not level.
We have heard about the extraordinary lengths to which insurance companies will go to find information. Companies' resources are not matched by those of the insured, especially when ill. A valid point was made about people with myalgic encephalomyelitis. Stress is probably as big a contributory factor to a relapse as the conditon itself.
I hope to hear something positive from the Minister about contracts. We need an arbitration service that is accessible to all, irrespective of whether the individual has a contract through a company scheme. If the company is an agent of the insurance company, the company can be got at, or it should act for its employee; at present that relationship is not clear. However, if the company acts as a go-between between an individual and the insurance company, the individual should not lose the right to go directly to any arbitration scheme that covers that set of insurance.
I look forward to hearing the Minister's answer to this important debate. It is interesting that a Treasury Minister is to respond, given that an Opposition health team has--I was going to say "attacked", but that is not the right word--tried to find a solution to a problem that we have all recognised for some time.
Mr. Howard Flight (Arundel and South Downs): I, too, congratulate the hon. Member for Eltham (Mr. Efford) on raising an important subject. To me, it is desirable that as many people as possible should have
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permanent health insurance. The House of Commons pensions arrangements were recently examined to see what scope there was for improvement: Members of Parliament do not have PHI, and I suggested that it might be wise to ensure that we do. We live in a stressful society. People have road accidents, strokes and all sorts of other ghastly things that render them unable to work for the rest of their lives, yet the total number of people to whom such things occur is small.
Insurance, in principle, is the correct way of dealing with the problem and it is sensible to have employer insurance arrangements: they bulk up the risk and save on the administration. Despite all that on the plus side, it is no good if a scheme does not work--not just because it fails to deliver what it ought to deliver, but because there is no practical way for people to resolve disputes. In the United States, success fee lawyers will work on almost any case, usually free of charge if the case is a good one; but in this country such arrangements operate to only a modest extent.
Two thoughts occur to me. First, this area of insurance should be covered by the Financial Services and Markets Bill. Paragraph 20 of schedule 2 to that Bill refers to:
"Rights under a contract of insurance, including rights under contracts falling within head C of Schedule 2 to the Friendly Societies Act 1992." Will PHI be covered by the Bill, as that seems to imply? Secondly, ombudsman facilities should be available so that people can get inexpensive justice. If the ombudsman finds against a person, it may be tragic, but at least he will have had fair justice. Part XV deals with the financial services ombudsman: under clause 201, the Financial Services Authority can apparently determine that such territory is covered by compulsory jurisdiction, but the wording is obscure, so I ask the Minister to confirm my interpretation.
One of the things that I learned when I went to see the new ombudsman at the FSA was that the whole of the ombudsman arrangements were born within the insurance industry, which was endeavouring to earn itself brownie points by dealing with disputes in a way that would make its clients happy and was not carried out internally. I can understand that to pay an income for life requires a large sum and that the industry must be careful with its resources, but what is sauce for the goose is sauce for the gander.
Given that the whole ombudsman scheme is modelled on the insurance ombudsman scheme that was set up by the industry, I would be disappointed if the FSA could not determine that the ombudsman should be able to resolve such cases. There is a slight technical issue in that a person may have his own PHI, or it may be part of a company's cover and the company may be the client of the insurance company. Clause 201 certainly provides that someone using the scheme does not have to be an individual and so could be a body corporate, but the individual beneficiary of the corporate membership should clearly be able to use the corporate membership's right to seek to obtain a judgment by the ombudsman.
Amusingly, there is an imbalance within the ombudsman scheme. One would have thought that both sides would be bound by his findings, but that is not the case. The company is bound by the ombudsman, but the individual has the right to go to law. That was
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volunteered by insurance companies when setting up ombudsman arrangements. Although it is somewhat difficult to argue, the logic went that no one would go to the expense of using the courts after having gone to an ombudsman and lost, as it would not be sensible or affordable to do so. That is the problem here. Unless he can use an ombudsman scheme, no one who is thrown out of work by a permanent disability can afford to use the courts to fight his case. Therefore, I conclude by asking the Minister whether the relevant clauses of the Bill cover that territory and whether the FSA intends, under the designation for the ombudsman scheme, to cover the ombudsman scheme dealing with this type of dispute.
The Economic Secretary to the Treasury (Miss Melanie Johnson): I join other hon. Members in congratulating my hon. Friend the Member for Eltham (Mr. Efford) on securing this debate on such an historic day. It is the last parliamentary day of the century and, indeed, the millennium. The subject matter measures up to the importance of the occasion. Health insurance, its development and wider availability, might come to be seen as one of the great success stories of social policy in this century. Health insurance is crucial to every living and breathing person in this country. It provides a safety net. It helps to protect those who are unable to work because of illness and who might otherwise fall into financial hardship and poverty. It can speed up the availability of treatment bringing unwell individuals back into the healthy work force that much more quickly.
There has been a huge change in peoples' lives and what they can expect out of those lives over the past hundred years. In 1900, there was no national health service. Poor people could not often afford to go to a doctor. Despite traditions of mutuality, few could have afforded to take out insurance in the event that they became incapacitated and unable to work, even if such insurance had been available. Today, there is a thriving and popular national health service, which is complemented by the private health insurance market.
There are four main types of private health insurance. Private medical insurance arrangements are offered to individuals or employers, enabling prompt treatment of a range of illnesses, in both public and private sector hospitals. Secondly, long-term care insurance is offered to meet the costs of medical care in old age, if such costs are incurred. Critical illness insurance offers cash benefits payable in full, once the existence of a named disease such as breast cancer is proven. Permanent health insurance--the subject of this debate--is a form of private insurance that offers limited income replacement, usually from a time shortly after a permanent inability to carry on one's chosen trade or profession has been established: this lasts until normal retirement age.
Permanent health insurance shares characteristics of other long term or life insurance products. The contract, once agreed, is generally irrevocable by the insurer, provided that the insured continues to pay premiums in full and on time. If the insured becomes unwell or suffers a debilitating illness, the insurer cannot choose to opt out of the contract or to increase the premiums. Like
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other insurances, which are essentially contracts made between one party and another, both sides have rights and obligations arising from the contract.
The permanent health insurance market is quite large. In 1998, 1.4 million income protection insurance policies were in force, as well as 1.5 million group policies. Premiums received by insurance companies amounted to nearly £750 million, although £638 million was paid out in benefits to United Kingdom policyholders. With premium income being taken well before benefits may become payable, and considering that over the lifetime of a 25 or 30-year contract the money paid by an individual is considerable, it is clearly important to put in place a regulatory framework to protect the customer--the policyholder. Protection must guard against market failure in terms of the insurer's financial solvency, and its ability to meet its liabilities to its policyholders.
The regulatory framework in the UK is, for the most part, contained in the Insurance Companies Act 1982 and regulations made under that Act. The Act also implements requirements of EU law. The framework for EU law on insurance business--essentially, single market measures--reflects the different regulatory concerns as between life and non-life business. There are three life, and three non-life directives, whose purpose is to promote open markets, but markets in which it is safe to do business.
Of the four types of private health insurance, private medical insurance is usually sold with characteristics of general insurance, as opposed to life and long-term insurance. From the policyholders' point of view, much general business is free from certain risks associated with long-term financial products: the contract is renewable each year; there is limited risk of financial loss if a policy is surrendered or lapsed; and there is not the uncertainty that attaches to investment return, as with some life insurance products. With many personal lines of insurance such as private medical, buildings and contents and motor insurance, the individual consumer can shop around and take advantage of changes in rates and in the extent of cover. That means that the consumer has more control and more responsibility.
Permanent health insurance is different. A customer who has signed one contract has some scope for cancelling and seeking a new provider; but premiums are often higher for those who take out policies later in life. Once a permanent health insurance policy is agreed, it tends to stay in place for some years--often until retirement, and sometimes until the customer decides that his needs have changed and the insurance is no longer necessary.
There is a difference between the regulation of permanent health insurance and some other long-term insurances. Permanent health insurance is not subject to the regulation imposed on investment-linked insurances, such as unit trust savings contracts with some life cover offered as part of a package. That does not mean that the selling of permanent health insurance is unregulated--far from it. The non-statutory Association of British Insurers code of practice governs the sale of such policies, so the regulatory framework bears on the insurers in terms of monitoring their ability to meet their liabilities, and their selling practices.
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If something goes wrong, most insurance companies now have internal complaints handling systems, complemented by an independent redress system. Members of the ABI belong to the insurance ombudsman scheme, the Personal Insurance Arbitration Service or the Personal Investment Authority Ombudsman Bureau. Of course, when the Financial Services and Markets Bill is enacted, all will come under the financial services ombudsman scheme, and the ABI code may be replaced by the rule book of the General Insurance Standards Council in the next year or so. Therefore we are at a point of great change.
These complaints handling systems covers areas such as claims made by customers against insurers within the terms of the insurance policies. The non-statutory code of practice is subject to a monitoring committee. Drawing on experience, the code is updated from time to time.
Let me turn in more detail to the ways in which the code will work and to some of the issues raised in the debate. The ABI has never managed to persuade its members that a code of practice or statement on claims handling would be desirable. I believe that it tried to do this a year or so ago, but that it could not convince them that a code would not intrude on the ability of companies to maintain their competitiveness. They were also concerned that it would be too general to be useful.
The Financial Services Authority's role focuses on its prudential financial supervision, but I hope and expect that the single ombudsman scheme, linked to the FSA's consumer panel--a new body within the FSA--and to supervisors, will ensure that persistent poor performers are spotted easily. Early identification of poor performers, and drawing them to consumers' attention, was one of the issues that ABI members raised.
Mr. Efford: Will my hon. Friend confirm that the FSA will have more scope than existing complaints or arbitration systems? Currently, individuals covered by group policies do not have access to that service.
Miss Johnson: I shall return to that point later. Access to the single ombudsman scheme is at present by third parties, but the FSA does not favour this. We take note of the comments of the hon. Member for Arundel and South Downs (Mr. Flight).
Hon. Members have set out well what happens when a customer claims to be unable to work, for example, because of an injury to his back. My hon. Friend the Member for Eltham set out what happens to people who try to seek redress and assert their rights through the system, and gave as an example the case of Mrs. Buckland. Individual cases bring home to us the difficulties that some people experience with the current arrangements, and the cases that have been mentioned have been well set out. My hon. Friend the Member for Staffordshire, Moorlands (Charlotte Atkins) focused on the difficulty that two individuals have had in resolving their claims. My hon. Friend the Member for Great Yarmouth (Mr. D. Wright) made clear his knowledge of the difficulties that those who suffer from ME face when they pursue their claims through the relevant systems. I am grateful for that strong focus on what things are like for individuals.
A customer might claim for example, that he is unable to work because of ME or an injury to his back, or for the other reasons that hon. Members have given;
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medical evidence might support that claim. All things being equal, the company should pay that claimant, unless it has good reasons to do otherwise. If it receives evidence that the customer with ME, a bad back or another complaint, has subsequently taken up high-board diving, it might want to review the case. However, we have clear evidence in the cases that hon. Members have mentioned that high-board diving would be out of the question for their constituents.
Disputed claims will always be a difficult issue. Insurers have obligations to all other policyholders not to pay out on fraudulent claims. Indeed, if premiums overall increase because claims are paid out too readily and without proper scrutiny, the costs involved will mean that potential customers are denied insurance. Obviously, we do not, in general, support such a development. However, the situation is clearly different in the cases before us.
Our objective is to protect policyholders. Insurance companies should be run by fit and proper management. Any evidence of systemic bad conduct should, in the first place, be taken up with the chief executives of the companies for internal review.
Sir Robert Smith : Will the Minister focus on what she means by "policyholder"? Does she mean the employee who seeks to benefit from the insurance policy, or the company, which is the policyholder in the case of group policies?
Miss Johnson : It would be for the group policyholder--the company--to decide whether to take matters up across the piece. It is for the company to be concerned about individual instances within their policy. However, I was primarily thinking about individuals who are concerned about the treatment that they receive at the hands of the insurance company. It is not in the long-term interests of insurance companies to promote poor-quality products or to cater badly for consumers. I hope that representatives of insurance companies are listening to the debate, because they will need to take that into consideration.
We have not made a commitment on naming and shaming. The FSA must decide how best to use its powers and carry out its consumer protection remit. The question about the financial services ombudsman scheme relates to third-party access. It is a matter for the FSA, which I hope will not ignore the sentiments that hon. Members have expressed when it considers how to construct its responses to the present situation.
It might be of interest to hon. Members to know that about 3 million people are covered by the relevant policies. There have been about 360 complaints to the various ombudsmen--or ombudspeople.
I welcome the attention that my hon. Friends and other hon. Members have drawn to the problems that their constituents have experienced. It is unwelcome that there is evidence of persistent procrastination and prevarication, but welcome that those who have spoken have drawn that evidence to the attention of many people through this debate. I hope that the matter will be taken up with insurance companies, and I am certainly prepared to take it up with the industry on behalf of those involved.
Mr. Efford : Does my hon. Friend agree that the number of claimants covered by a group policy who go
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to the ombudsman is insignificant because there is no ombudsman? One of the difficulties is that it is hard to get statistics because there is no means by which people can complain. Individuals are left with the choice of going to the courts, giving up because they are too ill to fight the company, or taking their case to Europe, which involves putting themselves at enormous financial risk when they are at their lowest ebb.
Miss Johnson : I note my hon. Friend's remarks. I am not sure that there can be no redress through the ombudsman. The ABI says that individuals in group policies have access to him.
Dr. Brand : I am following the Minister's remarks carefully because we are getting slightly conflicting views on the matter. I believe that individuals can go directly to the ombudsman, if they are supported by the policyholder--the company. However, the Minister is living in an unreal world if she believes that all companies love all their employees and ex-employees. Often, the disabled person involved might both have fallen out with the company that employs him and be making a claim against the insurance company.
Miss Johnson : The company is formally the policyholder in those wider cases, as has been intimated. My understanding of the case that my hon. Friend the Member for Eltham described is that the company backed the individual against its insurer; perhaps my hon. Friend will clarify the position.
Mr. Efford : I can certainly confirm that the employer acted in an exemplary fashion and pursued the case on behalf of its employee. However, it could complain only to the insurance company; there was no independent arbitration body to which it could go to pursue its case. It could go only to the courts.
I draw my hon. Friend's attention to the case of Mr. Villella, who was employed by MFI Furniture Centres Ltd. He went to court because his employer terminated his contract following UNUM's decision to refuse him any benefits under the terms of the insurance policy. He was forced to go to court. Eventually, he won his case against his employer, not against the insurance company. Does my hon. Friend agree that that has serious consequences for employers who take out insurance policies on behalf of their employees? If the insurance companies refuse benefits, firms might be challenged by their employees and become liable to court action. If that happens, employers will be wary of taking out insurance policies on behalf of their employees, because of their vulnerability in the courts.
Mr. Deputy Speaker : Order. Interventions are welcome, but I caution hon. Members that they must be brief. I have been tolerant in this case and I hope that no one else will take advantage of my tolerance.
Miss Johnson : I am grateful to my hon. Friend the Member for Eltham for making that point. The existing ombudsman schemes will consider complaints from companies and individuals in group schemes. Although I accept that the company may also be burdened, insurance companies and those taking out group
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policies should jointly consider the issue when the policies are drawn up. As for the point made by the hon. Member for Isle of Wight (Dr. Brand), there are subtleties involved. I shall write to the hon. Gentleman to clarify the matter, and copy the letter to other hon. Members who have participated in the debate.
I should now like to deal with the issue in relation to the Financial Services and Markets Bill. It is important to recognise that making permanent health insurance subject to a conduct of business-type regulation--covering selling, marketing and point-of-sale issues--would not help in cases of poor or dubious claims handling, to which other hon. Members have drawn attention. Therefore, it is important that the industry should tackle that problem, although the Government and the authorities clearly have a role to play.
As the hon. Member for Arundel and South Downs knows, general insurance is not covered by the Bill. I am therefore reasonably confident that health insurance is not covered either. Such matters will be dealt with in the scope order--a form of secondary legislation--which will not be made until the Bill has received Royal Assent, so I cannot be precise about what might be covered at that time.
UNUM is regulated by the FSA, but its practices are regulated by the ABI code. Practice in relation to customers can lead to references to the ombudsman and the courts. It is important to recognise that the contract of insurance is between the insurance company and the insured and is subject to the same contract law
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provisions as any other contract. That is one of the main focuses. However, I am concerned about the cases outlined by hon. Members, and I intend to bring them to the attention of the industry. Regulation will not necessarily deal with poor or dubious handling of individual claims--
Dr. Brand : Why not?
Miss Johnson : Because it will deal only with selling, marketing and point-of-sale regulation, not with bad handling of an individual, which will be subject to the normal process of redress through the ombudsman and so forth. Furthermore, given the evidence cited against some companies--especially UNUM, which has been mentioned in despatches too often in this debate--the FSA might want to discuss with the companies the issues raised today. That might resolve the question of whether such a method of handling consumer matters and cases is always the most appropriate.
The subject is important and I am grateful to hon. Members for their contributions to the debate. Although the Financial Services and Markets Bill will not be able to tackle the problems directly, a number of avenues are available for the raising of such issues. I shall do what I can--which is not without limitations--to ensure that the issues raised by hon. Members are taken up with the industry and that progress is made.
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