In the second of a series of articles exploring the finer points of critical illness protection, CIExpert's Alan Lakey discusses existing plans.
Critical illness plans are regularly refreshed, upgraded, future-proofed or otherwise adjusted with providers aiming to gain market share or fine-tune their offerings. Often this is due to medical advances that threaten the sustainability of the current plan design.
This can create serious problems for advisers when they are confronted with a client asking about the merits of an existing plan. Should the plan be left alone and topped up or should it be re-broked so as to simplify matters and enhance the cover?
These questions are assuming greater importance now professional indemnity (PI) insurance application forms are asking questions about the re-broking of CI policies and the level of due diligence being undertaken. The main determining aspect will be how the existing plan benefits and claim definitions compare with the newer versions.
Previous plans not always inferior
The use of the ABI+ appellation and the inclusion of additional conditions have led many to believe today's plans must be superior to previous versions. Whether this viewpoint is correct depends on the worth of the existing plan and also, to a greater extent, the sex of the planholder.
Table 1 looks at the term plans offered by four long-standing CI providers and highlights the trend for adding new conditions.
At CIExpert we have accumulated a library of historic definitions and these highlight the importance of making a true assessment. The period 2002-04, in particular, saw two major alterations. Firstly the cancer definition was weakened to deny claims for early-stage tumours of the prostate. The second change was the removal of coronary angioplasty due to its emergence as a low-risk and often outpatient technique.
Early stage prostate cancer provides around 18,000 new diagnoses annually, of which just over a quarter impact on the under-65s. Around 3,900 diagnoses will occur in the 55-64 age group, almost double the number that will suffer a first stroke. So, covering early stage prostate cancer for the full sum assured is, potentially, extremely beneficial.
With angioplasty, the benefit is dependent on whether the policy requires one or two arteries to be treated. Up to November 2000, Scottish Mutual Pegasus provided 100% payment for the treatment of one artery, with most other companies requiring two. Within the same male 55-64 age band, there are likely to be around 8,500 first-time procedures with over 80% being on one artery.
Prostate cancer only affects men and with angioplasty the male/female ratio is close to 3:1.
A scoring system, allied to the worth of the claim wording, shows how changes have affected the potential for a claim. Table 2 below assesses plans for non-smokers. Table 3 shows the magnified impact for smokers.
