Individual critical illness saw a relentless pace of change last year. But has the industry gone far enough? Fiona Murphy investigates.
In a short space of time we have seen two polar opposite individual critical illness plans come to the market; Skandia’s 56-condition all-encompassing proposition and D2C Beagle Street’s basic strictly-ABI-worded 26 definitions with 11 minute beginning-to-end purchase process.
During 2013 and the early part of 2014, you couldn’t move for another insurer introducing a new development to its individual critical illness (CI) plan. While this has been a positive step for the industry, do the changes go far enough?
The biggest move of late has been providers deciding to pay out on all types of heart attack, instead of measuring troponin levels as a cause for claim.
Alan Lakey, director of CIExpert, said: “A number of companies, starting from HSBC, broke away from the standard working of heart attack and moved from the requirement to have troponins, that’s very important as that’s likely to increase paid claims by 10% to 12%.”
Aviva is the latest provider to upgrade its CI policy, with the abolishment of using severity as a measure to pay claims to heart-attack survivors.
Andy Doran, claims philosophy manager at Aviva, said: “We are looking at the areas in which customers claim the most to make an impact in real terms. The best message of CI is that it’s complex, and we are trying to make it simple.”
Mark Dennison, owner of LightBlue UK, welcomed such changes: “With medical advancements making it easier to detect [problems], anything that makes it black and white to claim is to be welcomed. There is still the perception out there that insurers won’t pay out.
“The CI market has been in massive transition over the past seven years, and public perception is very confused. Even among advisers there is confusion, as the definitions vary between providers and what might pay out on one instead of another.”
There has been a real commitment from insurers to pay out on core conditions including cancer, heart attacks, strokes, and upgrading policies ahead of the expected changes from the Associated of British Insurers (ABI) definitions on CI policies.
Steve Casey, head of marketing and propositions at Ageas, said: “Several providers will have to change products to meet the minimum mandatory ABI statement of best practice. There will be more changes coming up. I think there will be four or five in the next few weeks.
“With the intermediated market, you need to offer a quality product at a fair price. We look at all declined claims and the reasons why. In reality, if there’s something the standard man would think unreasonable, we would too.”
So aren’t insurers jumping the gun in upgrading their policies when the ABI hasn’t released their guidance as yet?
Doran explained: “The ABI definitions due to come out are brilliant for the industry: a baseline of what is acceptable and right for customers. However, we wanted to be a bit more progressive than that.
“The ABI definitions will cater to the mass insurance industry. Heart attacks are the second-biggest cause of claim and from my understanding our definition is above what the ABI is looking to do anyway, so we won’t have to make a change again.”
For Lakey, the companies that are revamping their definitions are sorting those who want to compete on quality by producing definitions above the ABI’s aims and those who want to compete on price while just adhering to ABI definitions.
Another positive step is the fact that providers have introduced children’s cover or widened existing definitions so children are covered from birth.
Emma Thomson, life office relations director at Lifesearch, said: “What I really liked last year was the focus on children’s critical illness from Friends Life. LV= made changes recently too, although it didn’t go as far as Friends Life in terms of bringing illnesses diagnosed in childhood such as cystic fibrosis. But the fact it has expanded eligibility is really good. What Friends Life did – increasing the number of conditions one can claim for, introducing funeral benefit and covering congenital issues – is really welcome.”
However, not every insurer has introduced such changes, with children still being potentially turned down in the CI market if they are born with heart defects, for example.
Lakey added: “The cost of adding congenital conditions in the scheme of the condition is minor. It might put the premium up by 10%, but children’s cover might be 2% of the total premium. I’d like to see every company have a proper definition, particularly to avoid the bad feeling parents might have if they realise that under other companies they could claim.”
Pace of change
So how are advisers dealing with this constant whirl of change? With some difficulty, according to Doran: “For me it’s never going to be like for like, so we have tried to make it as easy as possible for advisers to compare.”
Thomson warned: “There needs to be far more to support existing changes, because it’s encouraging churning.”
Dennison added: “I think most IFAs are lazy and will sell what is easiest to sell. Most won’t sell IP because there are so many variations. There needs to be better sales training for advisers. Being a cynic, it comes down to the fact people in the industry cannot sell. They don’t know how to present CIC to hit home the importance of it.”