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online technical resource

personal accident insurance

introduction

Personal accident insurance can be provided in two ways:

  • as a stand-alone policy – either as an individual policy or a group policy, where an employer takes out a policy on behalf of its employees; or
  • as a benefit included as part of another product – for example, with travel insurance or a bank account.

Most personal accident policies pay out lump sum benefits when the policy terms are satisfied – which usually means when the consumer dies or suffers bodily injury as a result of an accident or unforeseen event.

Policies usually state that the consumer is not covered if the death or injury is caused by “sickness, disease or any naturally occurring condition or process”. To be met, the consumer’s claim must not fall within this or any other exclusion clause in the policy.  
Generally, personal accident insurance policies cover as standard:

  • death
  • permanent total disablement; and
  • loss of, or loss of use of, a limb.

Some policies also cover permanent partial disablement, temporary total disablement and/or temporary partial disablement.

Levels of benefit, definitions of key terms and areas of cover and exclusions vary from policy to policy. This note covers situations we most frequently see – but we will always decide a complaint based on the terms of the policy in question and the facts of the individual case.

Personal accident policies only offer protection against accidental death and bodily injury – and not against sickness or general disability, which may be covered by other types of insurance. When we look at a case, we will consider whether the business took the consumer’s particular needs into account.

what complaints do we see?

Complaints that consumers refer to us most frequently are that the financial business refused to pay the claim by wrongly deciding that:

The consumer may also complain that:

was there an accident?

Even though personal accident insurance only pays out following an accident, we sometimes find that the word “accident” is not used in the policy document. Instead, the policy says that the consumer must suffer death or bodily injury as “the direct result of an accidental, external, violent and visible cause” (or similar words to that effect).

what does "accidental" mean?

If there is no definition of "accidental" in the policy, we generally apply a definition of the word as it is commonly understood: an unforeseen or unexpected and unfortunate occurrence. It can either be the cause or the result that is unexpected – but at least one of them must be.

what is an "external, violent and visible cause"?

We will look at the particular circumstances of each case to decide whether what has happened meets the policy’s requirements. For example, a car accident may be external, violent and visible – whereas a heart attack is violent and visible but not external. 

However, we will carefully consider how likely it is that the death or bodily injury is attributable to a particular cause. For example, a heart attack could lead to a car accident – or a car accident could lead to a heart attack. Or it could be that the two events are completely unrelated.

Where the consumer has died, we will look at the evidence we have to establish the most likely sequence of events leading up to the death. This may involve addressing difficult issues about the cause of death. For example, if we decide it is likely that the consumer had a heart attack before the accident, we need to consider whether they were killed in the accident, or whether they would have died anyway from the heart attack.

is the death or bodily injury "accidental" if it occurred during surgery?

Businesses sometimes turn down claims for death or bodily injury following surgery, saying:

  • the death or bodily injury was not accidental; and/or
  • the accident was not the sole and direct cause of the death or bodily injury.

All surgery involves some risk – so we try to take a common-sense approach. We will consider whether we think the risks were explained to the consumer and they were unlucky – or whether something happened unexpectedly, unplanned or as a result of negligence before, during or after the surgery.

were there contributory causes?

Most personal accident policies require the death or bodily injury being claimed for to have resulted solely and directly from an accidental cause. They also usually state that the consumer is not covered if the death or bodily injury is caused by “sickness, disease or any naturally occurring condition or process”.
This means that businesses turn down claims on several grounds:

  • factors other than the accident resulted in the death or bodily injury – for example, illness, disease or a degenerative condition;
  • the accident did not cause, but brought forward a death or bodily injury that would have happened anyway because of an existing medical condition; or
  • the consumer was already disabled and the accident just increased the level of disability.

Businesses usually refer to medical reports and records, the death certificate and/or the coroner’s report when declining claims for these reasons.

what if there were factors other than the accident?

We will look at the circumstances of each individual case to decide how far we think the accident contributed to the death or bodily injury that is being claimed for. We will consider whether the accident alone would have resulted in the death or bodily injury.

We are unlikely to decide that it is reasonable for a business to avoid liability for a claim just because there were contributory causes in addition to the accident. If we think this is likely, we may tell the business to pay the claim. However, we may not uphold a complaint if we are not persuaded that the accident was a significant contributing factor.

If we think it is more likely than not that the accident was a contributing factor to the death or bodily injury – even if it was one of many factors – we may tell the business to pay part of the claim. To decide what proportion the business should pay, we will consider how far the accident contributed to the death or bodily injury in comparison with the other factors (see below).

what if the accident brought forward the effects of –or worsened – an existing disability?

In some cases:

  • the accident accelerated the effects of a condition that the consumer already had; and
  • the existing condition meant that they would have died or suffered disability at some point in the future – even if the accident had not happened.

For example, it might have been likely that a consumer with arthritis would become permanently and totally disabled within ten years because of the condition. But an accident may have brought the effects forward so the consumer immediately became permanently and totally disabled.

Some policies do allow for proportionate payments in these situations. But even if it is not in the policy, we will look at the individual circumstances of each case to decide whether we think it would be reasonable for the business to meet part of the claim (see below).

If we think it is likely that an accident worsened an existing disability, we may decide that the consumer is entitled to some benefit. But we will look for clear evidence that the accident increased the consumer’s level of disability. If there is, we usually tell the business to pay a proportion of the benefit (see below).

was an exclusion clause applied unreasonably?

Personal accident policies generally include exclusions of cover. For example, the policy may say a claim will be rejected if:

  • the death or bodily injury was due to the consumption of alcohol and/or drugs;
  • the death or bodily injury resulted from a deliberate self-inflicted injury or the consumer “recklessly” exposing themselves to danger; or
  • the death resulted from suicide.

The wording and effect of these exclusions will vary between policies – so we will carefully consider the policy in question.

Many policies will also exclude claims for death or bodily injury resulting from specific activities such as driving a vehicle with less than four wheels, diving, mountaineering, rock or cliff climbing, pot-holing, parachuting, professional sports, boxing, racing and flying when not a fare-paying passenger.

Policies usually also contain exclusions for various categories of “war” and “invasion”  – as well as for claims arising from serving in the armed forces (although specialist forces personnel policies are available).

In each case, we will see whether the business can provide evidence showing – on the balance of probabilities – that the exclusion applies to the particular situation.

alcohol and/or drugs

Most personal accident policies contain an exclusion that means if the death or bodily injury is caused by alcohol and/or drugs, the claim will not be paid. Again, the wording will differ from policy to policy – so we will check to see what the particular cover excludes.

Where the cause of an accident is in question, we will carefully consider whether the accident simply happened after someone consumed alcohol and/or drugs – or whether the consumption of alcohol and/or drugs directly caused the accident.

We will look at whether the business can show it is more likely than not that the consumption of alcohol and/or drugs caused the accident – or meant that the consumer did not escape the consequences of an accident as they may otherwise have done.

We will also consider:

  • whether the consumer anticipated the risk of death or bodily injury;
  • and if not, whether the consumer could have reasonably anticipated the risk of death or bodily injury.

For example, if the consumer was run over because they were lying down in the road while drunk, we may decide they could have reasonably anticipated that death or bodily injury would happen as a result.

But if a drunken consumer was hit by a speeding car while crossing the road, we may be less likely to decide that they anticipated – or reasonably could have done – that death or bodily injury would happen. 

If we think the accident probably would have happened whether the consumer was drunk or not, we may decide it is unfair for the business to apply the exclusion clause.

deliberate self-inflicted injury or “reckless exposure to danger”

A policy may contain an exclusion clause relating to deliberate self-inflicted injury or “reckless exposure to danger” – meaning that if death or bodily injury results from either of these, benefit is not payable. Some policies may refer to “needless exposure to peril” or “exposure to exceptional danger”.

The main issue involved in complaints about this exclusion is whether a particular action is a “reckless exposure to danger”. For example, although some people may argue that cycling without a helmet is a “reckless exposure to danger”, others say – and we may agree – that it is common practice and part of ordinary life. On the other hand, it would be harder to argue the same point for base-jumping.

However, many of the situations we see are less clear-cut. So we try to take a common-sense approach – taking into account the policy terms and the individual circumstances of each case.

For example, when deciding if quad biking is a “reckless exposure to danger” in a particular case, we would need to consider factors like whether the consumer was wearing a helmet – and whether they were on private land.

suicide

Sometimes, a business will reject a claim because it believes that the consumer committed suicide. We will ask the business to show us evidence that – on the balance of probabilities – suicide was the most likely cause of death.

Coroners have to be satisfied beyond reasonable doubt before they can record a verdict of suicide. So if the coroner returns a verdict of suicide, we will decide that the death was not accidental.

However, if the coroner is not satisfied beyond reasonable doubt, they may record an open verdict. This means we will still need to decide what happened on the balance of probabilities. But we will give particular weight to the coroner’s findings into the cause of death.

is the consumer sufficiently disabled?

When defining in what circumstances permanent total disability benefit will be paid, personal accident policies usually use one of the following criteria:

  • the consumer is totally unable to perform their own occupation;
  • the consumer is totally unable to perform any occupation for which they are suited because of their education, training or experience; or
  • the consumer is totally unable to perform any occupation whatsoever.

However, we generally say it is unreasonable for a business to limit benefit to the rare situation where the consumer is completely unable to carry out “any occupation whatsoever”. So we are unlikely to support a strict interpretation of this criterion – unless we think that the consumer was aware of its restrictive nature at the outset. Instead, we usually interpret it to mean “any suited occupation” based on the consumer’s education, training, or experience.

how do we put things right?

Personal accident policies are “non-indemnity” insurance contracts – meaning they will not (and in most cases cannot) put the consumer back in the position that they were in before the accident. If its terms are met, a policy will simply pay financial benefit in cases of death or bodily injury where the policy terms are satisfied.

Because they do not compensate consumers for loss of earnings or incapacity from working, there is no limit to the total benefit that can be claimed by the consumer. This means a consumer can usually claim for the same injury under several different policies – though there may be restrictions if the policies are with the same insurer.

Benefit will be payable if a disability is defined in the “table of benefits” included in the policy, and the terms of the policy are satisfied. The table of benefits will vary between policies. Where the consumer and the business disagree over which category the consumer falls into, we will look at any medical evidence to assess what we think would be reasonable in each individual case.   

when might we tell a business to pay a proportion of the benefit?

In some cases, we do not think that the full benefit should be paid – but we decide that it is fair and reasonable for the business to pay a proportion of it. For example:

  • where the death or bodily injury did not happen solely as a result of the accident – as other factors were involved (see above)
    Here, we will assess what proportion of the death or bodily injury we think  can reasonably be attributed to the accident. We will usually then tell the business to pay that proportion of the benefit. For example, if we see medical evidence suggesting that the accident caused 25% of the injury but a degenerative condition caused 75%, we may tell business to pay 25% of the benefit.
  • where the accident brought forward the effects of an existing disability (see above)
    We will assess the available medical opinion about how far the accident brought forward the death or bodily injury. We generally then tell the business to pay a proportion of the benefit in line with this.

    For example, if the consumer’s likely working life is shortened from 40 to 30 years by the accident, we may tell the financial business to pay 25% of the benefit (ie the years “lost” as a proportion of the total working life).
  • where the accident worsened an existing disability (see above)
    Our approach is to assess the available medical opinion about what proportion of the disability is attributable to the accident. We generally then tell the financial business to pay a proportion of the benefit in line with this assessment. If, for example, the medical opinion indicates that 25% of the disability is attributable to the accident, we may tell the financial business to pay 25% of the benefit.
  • where the consumer has a permanent disability –but is not totally disabled
    If a consumer suffers serious functional impairment as a result of an accident, we may decide it is reasonable for a proportionate benefit to be paid – even if they have some residual function and so the disability is not strictly “total”.

    We will consider whether, in all the circumstances, the consumer had a reasonable expectation that the policy would pay out if an accident caused them a life-changing disability. We see this approach to claims taken to be good practice in the industry.

    We will assess specialist medical opinion on the extent of the disability and use any available guides and official calculators to determine what proportion of benefit – if any – is payable.
  • where the consumer has suffered only a partial disability – and that disability was only partially caused by an accident
    For example, the consumer has had an accident resulting in them losing 80% of the use of a shoulder – 50% of which was directly caused by the accident and the remainder by an underlying condition. Taking into account all the other circumstances of the case, we may say it is fair and reasonable for the business to pay 50% of 80% of the relevant benefit.

interest

Where we decide that the business wrongly turned down the consumer’s claim and so the consumer has been deprived of money, we will usually tell the business to pay compensation at our normal rate of 8% per year simple.  

In some situations, the claim under the policy is delayed – for example, in claims for accidental death, the estate of the person who has died may not be aware that there is a policy in place. In these cases, we generally say that the interest is payable from the date that the claim would have been accepted by the business – rather than from the date of the death or bodily injury. This is to reflect the fact that a business cannot accept a claim it is not aware of.

compensation for distress, inconvenience or other non-financial loss

In some cases, we decide that the consumer should be paid compensation for distress, inconvenience or other non-financial loss caused by the business.

was the policy mis-sold?

There are several reasons why a consumer might say they were mis-sold a personal accident policy:

  • they did not understand the nature of the policy that they were applying for;
  • they thought that the policy would provide benefits in different circumstances than it actually does; or
  • they did not apply for the policy at all – for example, they say that it was added without their knowledge to another product they took out over the phone.

The most common misunderstandings we see among consumers are that:

  • they did not realise that their policy does not cover them for illness; and
  • they did not realise that the death or bodily injury has to be caused by an accident for benefit to be payable.

Mis-selling complaints are generally made against the seller – who may or may not represent the insurer directly. Insurance regulations place an obligation on the seller to ensure that the policy is suitable for the consumer and that it is adequately explained to them. We will examine the all evidence available about the sale to decide if the seller met these requirements.

However, if it is the pre-sale and/or policy documentation that has caused the confusion about the cover, the consumer’s complaint would normally be against the insurer – as the provider of that documentation. We will look at all of the documentation the consumer would have seen and decide whether this made clear what was covered by the policy and highlighted any unusual limitations or exclusions.

Income protection policies sometimes state that if the consumer has any other disability insurance policies, the amount of this other benefit should be deducted from any income protection benefit payable.

In these cases, we will first establish whether the policy terms clearly allow this arrangement. And if they do, we will then decide if this significant limitation of cover was made clear to the consumer. We will look at the sale of both policies to see whether the potential impact of having both insurances was explained.

compensation

If we decide that a policy was mis-sold, we will usually say that the business should refund all of the premiums the consumer has paid plus interest of 8% simple per year. We will also consider whether the business should pay the consumer compensation for distress and inconvenience.

In some cases, we may tell the business to pay the claim as if the restriction was not part of the policy terms. This might happen if we decide that the exclusion was unfair or unusual and was not brought to the consumer’s attention – or if the consumer could have bought a policy elsewhere which would have covered their claim.

Similarly, if we decide that the mis-sale meant the consumer was entitled to rely on statements and representations made by the seller, then we may decide that compensation should be paid either for distress and inconvenience or for the full amount of the consumer’s claim under the policy.

other information we publish

Ombudsman news case studies and features involving personal accident insurance


help for businesses and consumer advisers

contact our technical advice desk on 020 7964 1400

This is part of our online technical resource which sets out our general approach to complaints about a wide range of financial products and issues. We would like your feedback on how helpful you found it. Please also use the feedback form below to tell us about anything you think we could clarify or explain better.

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  • The law requires us to decide each case on the basis of our existing powers and what is fair in the circumstances of that particular case.
    We take into account the law, regulators' rules and guidance, relevant codes and good industry practice at the relevant time.
    We do not have power to make rules for financial businesses.
    Our current approach may develop in the light of circumstances disclosed by further cases we receive.
    We may decide that fairness requires a different approach in a particular case.