One of the U.K's largest insurance companies says it does not believe what is put on some policy applications. Therefore, it is now giving customers an opportunity to come clean about their lifestyle and also their state of health. This is before any claims are made and subsequently refused.

Norwich Union wants customers to think again about key details on their application forms for life insurance and critical illness cover.

This will give policy holders the chance to correct any information that may be misleading regarding their health status.

Additionally, the insurers want to know ‘accurately and truthfully' how much alcohol their policy holders drink and whether they have taken recreational drugs. The company is going to write to 5,000 customers that will be chosen randomly. They may eventually extend the offer to 2 million others.

As a result of the information given, policies could be cancelled or premiums may rise.

To ensure low premiums, those applying for life and critical illness insurance may be tempted to say they are in the best of health.

Insurance companies are clamping down though and are spending increasing amounts of money and time to discover incorrect applications. They are even hiring private detectives that follow and film claimants. On these types of policies, as many as 20 per cent of claims, are rejected by the insurers.

Customer fraud is just one part of the problem the other is how the insurance is sold.

For critical illness cover, which pays out when a claimant has to give up work because of an illness such as cancer, the application forms are complicated and filled with open-ended questions.

This makes it very difficult for a customer to complete and be totally sure of the information required. The insurance company then have room to wriggle out of paying up.

"It sounds extreme yet failing to tell your insurer about a visit to the doctor about a headache a few years earlier could invalidate a claim if the insurer decides this is relevant," a spokesman said.

12 per cent of claims on critical illness cover and 1 per cent of life insurance claims are rejected.

Payment protection insurance also has some serious problems. This insurance is to cover important bills in the event of illness or unemployment.

Companies often refuse to pay out when a claim is made, so the Office of Fair Trading is investigating this as well as the price of PPI.

Willie Mowatt of Norwich Union said:"Unfortunately a percentage of claims are rejected because customers have not disclosed their full medical history and as a result their policies are actually invalid.

"We want to be able to clearly advise people who think they may have non-disclosed how to proceed if they believe they may have missed something off their application form.

"Having a policy declined due to non-disclosure just adds to the stress at what is a very difficult time."