Industry figures have said that the Association of British Insurers (ABI) Statement of Best Practice for Critical lllness Cover consultation has not yet involved intermediaries in a meaningful way as media reports have indicated that proposals currently involve a reassessment of stage one critical illness claim payments.
COVER understands that the ABI's initial proposals are for stage one cancers to be excluded from full payment and would instead receive a partial payment of 25%. This would only apply to new policies.
Other areas to be reviewed in the consultation include model wordings for critical illness definitions.
Industry figures have expressed concerns that so far there has been a lack of meaningful discussion with the wider protection industry outside of insurer and reinsurer representation within the ABI's Working Group, as well as frustration with the scope of the proposals leaked to the media and the ABI's handling of the situation to date.
The ABI's Working Group on the Critical Illness of the Statement of Best Practice is solely comprised of representatives from insurers and reinsurers and does not include intermediary representation.
The last changes to the Statement of Best Practice for CI had been introduced in 2014. It had clarified the difference between additional and partial payments and bought the heart attack definition in line with clinical practice.
However the ABI has told COVER that the consultation would involve significant engagment with protection intermediaries.
COVER understands that the ABI has so far contacted some intermediary firms such as LifeSearch - although they were given just a week to provide feedback.
COVER also understands that the consultation on the Statement of Best Practice is shaped as a three tier process: the first part is comprised of initial discussions, the second is set as broader engagement with the industry and the third is publishing the statement.
ABI statement to COVER
The ABI told COVER that the review would reflect "developments in medical thinking" and that the consultation would involve protection intermediaries.
Raluca Boroianu-Omura, head of health and protection at the ABI said: "Our review of the Statement of Best Practice is to ensure that CI continues to reflect developments in medical thinking, so that this product meets changing consumer needs."
However, she said: "The consultation involves not just insurers, but key protection intermediaries as well, as we want to ensure that any changes reflect the experience of providers and advisers across the market."
The ABI denied that any decisions had been made regarding the consultation including the scope for partial pay-outs for stage one cancers.
Concerns around stage one cancer
Alan Lakey, director of CIExpert, said that the ABI discussions were focussed around cancers that are becoming more easily detectable at stage one, such as thyroid cancer, which would lead to an increase in critical illness claims.
This has been seen in countries such as South Korea, where cases of thyroid cancer have quadrupled due to improved screening programmes. Similar trends in the UK could lead to a huge increase in CI claims.
However Lakey warned that removing full payments for stage one cancers would erode consumer trust in insurance further in the UK.
"This is where it gets emotive, say if every stage one cancer for every part of the body is no longer covered and only receives a partial payment - imagine the consumer point of view. [If you were sat in a doctor's office] and he said 'I'm sorry you have cancer', you probably would not care or understand if you had stage one or two, you would think ‘I have cancer.'
"There is a lack of education around stage one and two cancer so there will be a number of people who will think they are covered and will try to claim, or people who think they will not receive a payment and will not claim [what they are entitled to]. It has muddied the water somewhat."
He also questioned whether the partial payment would apply to all stage one cancers or certain cancers where survival rates were higher.
Lakey also warned if the plans from the initial discussions went ahead: "What impact will this have on advisers? I think this would kill off the re-broking market as no adviser will move a client away from a plan that would not cover stage one cancer.
"Whenever I speak to the [large advice] networks, they say that something like only 30% of their advisers sell protection insurance, will this stop them from advising on protection entirely?
"In overall terms I think it will reduce the level of belief and trust there is. If they keep the current situation [of meeting full payments for all stage one cancers], critical illness premiums could rise by 20% - I said that I don't care and my clients won't care - they don't know what the cost of CI cover is in the first place."
Ian Sawyer, managing director of Assured Futures said: "Cancer is such an emotive topic that any marginalisation or reduction of benefits, regardless of how medically justified, will cause anxiety for purchasers and disappointment for potential claimants.
"While many claims are paid, CI constantly provides the industry with the opportunity to disappoint consumers with a myriad of terms conditions and definitions, which too often lead to consumer disgruntlement, which therefore also provides an easy target for criticism."
However, the ABI's Boroianu-Omura, told COVER: "We remain very much in the consultation and listening stage at present - despite some media reports, no decisions have yet been taken on any aspect, including on any scope for partial pay-outs for stage one cancers".
‘Situation frustrating for distributors'
Emma Thomson, Chair of the Protection Distributors Group said that the ABI could "do a lot more" to engage the intermediary market.
She also expressed concerns that not all PDG members - who are specialist protection adviser firms - had been contacted by the ABI, nor was there a wider campaign put in place to engage intermediary or industry involvement.
"We often commend the work done in the protection sector by industry bodies like the ABI, however, the current situation is frustrating for many distributors.
"We know there is important work to be done and the debate about the future of CI is an important one. But it should be an industry wide debate and it seems the current structure is letting us down.
"Many of us have worked hard to promote the protection industry to consumers and there was a time when the ABI were more open about their plans, so it's disappointing to see recent criticism, which in our view was unnecessary and avoidable with better processes.
"We appreciate the ABI is a trade body representing insurers, however, there needs to be a greater focus on improving the outcomes for consumers - and likewise better communications with intermediaries, so that we can all move forward together as an industry."
Ian McKenna, director of F&TRC said: "The world has moved on and I believe a trade body, that only represents insurers, is no longer the right organisation to be deciding what good looks like in terms of the quality of cover being offered to consumers.
"This feels like a matter where adviser views are essential and for the ABI to imply, directly or otherwise, that insurers alone should work together to reduce the level and or type of cover available, feels like a potentially very poor outcome for consumers.
"Working alongside the Protection Distributors Group, F&TRC's Protection Forum has had some success in persuading insurers to adopt annual statements thus enhancing the level of information available to policyholders.
"I believe far more advisers would engage with protection if there could be greater clarity around understanding policy wordings, especially for Critical Illness cover.
"Rather than have such important decisions taken behind closed doors by a relatively small group of insurers and reinsurers, it is time to address these issues transparently from an adviser and customer perspective."
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