For many Malaysians, insurance or takaful premiums are paid in the hope of financial protection in the event of a crisis. But that protection can feel out of reach when a claim is rejected.
The Financial Markets Ombudsman Service (FMOS) provides an independent and impartial avenue for consumers to seek redress in relation to claim decisions they consider unfair.
Having handled countless disputes between financial consumers and insurers, we often see the same patterns of rejection. Understanding these "red flags" can help policyholders avoid common mistakes that lead to denied claims and the tedious process of seeking redress.
The "Big Four" Reasons for Claim Rejection
While every contract is unique, most claim rejections stem from a handful of recurring issues.
Policy Exclusions and Limitations
Claimants often assume their coverage is all-encompassing, but it rarely covers everything. Rejections often happen because the specific treatment or condition is explicitly excluded in the policy, such as certain cosmetic procedures or "experimental" treatments.
At FMOS, one of the more common areas of dispute concerns the interpretation of what constitutes "medically necessary" treatment. While a procedure may be recommended by a treating doctor, the insurer may decline the claim if its medical assessors determine that the treatment falls outside the policy’s definition of medical necessity, such as where it is considered optional, cosmetic, or non-essential.
Certain pre-existing illnesses or hospital admissions are primarily for investigation or diagnostic check-ups rather than active treatment. Not every treatment recommended by your doctor will be covered under your policy.
When there is a dispute over how policy terms are interpreted or applied, FMOS can independently review the claim decision and determine whether it is consistent with the policy wording.
Each case is assessed based on its own facts and circumstances. This is why understanding what your policy covers, excludes and requires can help you prevent disputes later.
Non-conformance with Terms and Conditions (Breach of Conditions)
Many people believe that once they have paid their insurance premiums, any loss or medical expense will automatically be covered. However, insurance policies operate within a framework of terms and conditions that policyholders should understand. Claims can be declined where those requirements are not met.
For example, a motor accident claim may be declined if the vehicle was driven by an unauthorised or unlicensed driver, while a medical claim for a non-emergency elective procedure may not be covered if prior approval or a Guarantee Letter (GL) was required but not obtained.
Similarly, a burglary or water damage claim may be declined if the property remained unoccupied for a period exceeding the period allowed under the policy and the insurer was not notified as required under the policy terms. These seemingly small oversights can result in a rejected claim, even when the loss is genuine.
The same applies to reporting timelines. If your policy says you must report an incident within 14 days, waiting two months to do so can give the insurer grounds to reject your claim because they can no longer conduct a proper investigation.
An insurance policy is a two-way contract; if you fail to fulfil your part of the agreement, the insurer is not obligated to pay out.
Non-disclosure and Misrepresentation
Insurance is based on the principle of “utmost good faith." Put simply, it means that insurers rely on consumers to provide complete and accurate information when applying for coverage.
By signing the application form, you are confirming that you have disclosed all material facts, including any information that may affect the insurer’s assessment of the risk and its decision to offer coverage.
We frequently see situations where policyholders do not disclose certain symptoms because they consider them insignificant or unrelated to their insurance application.
For example, a person may dismiss a recurring cough or a previous episode of back pain as minor issues, particularly if no formal diagnosis was made. However, such information may still be material to the insurer’s risk assessment and should be disclosed when required.
When you make a medical claim, insurers will review the information you provided when you first bought your policy. If a pre-existing condition was not disclosed, even by mistake, it could affect your claim and your coverage.
In more serious cases, non-disclosure may affect the validity of the policy or impact a person's ability to obtain insurance coverage in the future. This underscores the importance of providing a complete and accurate medical history at the outset.
Failure to take reasonable precautions in safeguarding the vehicle
We often hear the phrase "just for a while”. Whether you are going to a 7-Eleven or waiting at an ATM, leaving your car engine running with the keys inside is a recipe for trouble.
This is often classified as a "failure to take reasonable precautions." While it may feel like a minor lapse in judgment, your insurance contract specifically requires you to take all reasonable steps to protect your vehicle from loss or damage.
If you leave your car unlocked, the engine running, or the keys in the ignition, you are making it too easy for a thief. In such scenarios, the insurer is well within their rights to reject the claim, as the theft was not an unavoidable accident, but a direct result of the policyholder's own negligence.
Similarly, most travel policies require you to take "reasonable precautions" with your belongings. If you leave your luggage unattended in a café or airport lobby and it is stolen, your insurer may reject the claim because you failed to keep your belongings under your supervision, breaching the policy's duty of care clause.
The "safeguarding" clause is there for a reason, and insurers expect you to treat your vehicle and belongings with the same caution you would expect of any owner.
What should you do if your claim is rejected?
A rejection letter from your insurer or takaful operator is not necessarily the end of the road.
If you believe the insurer unreasonably rejected your claim, you must lodge a formal complaint with the insurer itself before coming to FMOS.
However, once the final rejection letter is issued, you have 6 months from the insurer's final decision to file your dispute with FMOS for claims involving direct financial losses of up to RM250,000. You can also file your dispute with FMOS if the insurer did not respond to your formal complaint within 60 days.
Keep your medical reports and correspondence because if a dispute escalates, verbal agreements are almost impossible to prove during a dispute.
FMOS goes beyond strict technical compliance; we evaluate every dispute based on fairness and reasonableness, ensuring that each claimant’s unique circumstances are properly considered.
A final word of advice from FMOS
Insurance and takaful are important tools for financial protection, but they are also contractual commitments. Protecting yourself starts long before you make a claim.
Many disputes arise from a simple gap between what consumers expect their policy to cover and what the contract actually provides. Take time to understand your product disclosure sheet, ask questions about exclusions, and clarify any doubts with your agent or insurer before signing up.
Utilise the 15-day free look period to go through the policy terms; you can decide to cancel the policy during this free look period with a full refund of the premium paid.
If you are unsure whether to declare a past medical visit or symptom, it is always better to be transparent from the start. Providing complete and accurate information helps ensure your coverage remains effective when you need it most.
When making a claim, submit complete and timely documents to support a smoother assessment process. A few minutes of extra care today can go a long way in protecting your peace of mind tomorrow.
FMOS is a fair and free platform that helps consumers and investors resolve disputes involving direct financial losses in the financial and capital markets.
Resolving Disputes, Maintaining Trust
File Your Dispute: complaint.fmos.org.my
Official Website: www.fmos.org.my
General Line: +603-2272 2811
Address: Level 14, Main Block, Menara Takaful Malaysia, No. 4, Jalan Sultan Sulaiman, 50000 Kuala Lumpur.
Operating hours: 8:30 am – 5:30 pm, Monday–Friday
This content is provided by Financial Markets Ombudsman Service (FMOS)
The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.
Interested in having your press releases, exclusive interviews, or branded content articles on Malaysiakini? For more information, contact [email protected] or [email protected]
