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An attempt by the ABI to bring its members in line with the FSA’s treating customers fairly regime which led to a document published in January demanding its members refuse fewer income protection, critical illness and other protection claims now appears flouted by some life offices.

The guidelines set out in writing for the first time how companies are expected to deal with claims in cases where some information was not disclosed, and the ABI called on providers to make “a proportionate remedy” in cases where consumers have been “negligent” in their disclosure through insufficient care”.

Refusal to meet insurance claims on grounds of non-disclosure is one of the most controversial issues in protection and a major cause of public reluctance to take out cover.

Martyn James, spokesman for the Fos, has admitted some insurance companies are not taking the new rules as seriously as others. He said: “In terms of how companies are reacting there are variations from business to business. We have noticed some differences. We do not act in a regulatory capacity, but we do give our views and make companies aware of our views in individual cases.”

He added he was not prepared to name specific companies which are failing to put the guidance in place and claimed many others were being “very pro-active”.

Jonathan French, press officer for the ABI, dismissed the rift between providers as “silly”.

He said: “As far as we are aware the guidance has been implemented by all ABI member companies. I am not aware of any differences in different firms’ approaches. The ABI and the Fos are working very hard to make sure implementation is the same across the whole industry and that is what will happen.”

Norwich Union would not give a figure for critical illness payouts so far this year, citing the data as “commercially sensitive”, but the company did say it had seen a 3 per cent increase on the proportion paid on the equivalent period in 2007. Of this increase, it said, two-thirds were full payments and one-third were proportionate ones in line with the new ABI rules.

Trevor Bailey, protection marketing director for the Aviva-owned business, said: “We were early adopters of the recent ABI guidance and and take very seriously this part of the proposition, which is clearly what customers are ultimately paying for.

“In this regard, we believe that we are meeting fully our customers’ expectations and our claims statistics to date suggest that this is so.”

Friends Provident announced proposals to pay proportionate sums to claimants in some cases of non-disclosure last June, before the ABI document.

The insurer was unable to provide 2008 figure but said the 2007 changes had seen a rise in payments for critical illness of around five per cent on 2006, to nearly £36m.

Mark Jones, head of protection for Friends Provident, said the changes were “one small step to restore consumer confidence in the valuable benefits critical illness cover provides”.

He said: “Friends Provident is in the protection business to pay valid claims, to be able to do that we rely on the customer to provide us with all the information we need. Where we have found the non-disclosure to be a genuine oversight we will make an offer based on a proportion of the total claim.”