Are older CI plans better or worse than modern ones? The answer can be surprisingly complex. Alan Lakey explains.
At CIExpert, we are frequently asked whether current plans are better than those available five, ten or 15 years ago. It is an area that mystifies many, because back in 1999 and 2004 CI policies covered far fewer conditions.
During 1999 Aviva included 21 conditions. This improved to 24 in 2004 and to 54 in 2014. Similarly, Scottish Provident moved from 23, to 25 to 42.
If counting conditions is a worthwhile guide, today’s plans are markedly superior to their antecedents. Such logic is irrefutable, isn’t it? Table one would appear to corroborate this, as it shows how Aviva’s plan has evolved over the years for a non-smoking male aged 25 requiring £250,000 of cover. The percentage figures are taken from CIExpert’s scoring system using 1994 as the base mark.
The various plan improvements had a relatively minor impact until October 2009 when Aviva made a concerted effort and added five conditions, while also enhancing the wordings of several others. This progression has continued, apart from a small blip in November 2012 when the benign brain tumour definition was downgraded.
In percentage terms, the current plan shows as 37% more likely to pay a claim than the March 1994 version, which is a clear indication that a young, non-smoking male is better covered today.
So does this mean that any consumer with such a plan should be re-broked? First, a 25-year-old of 1994 would be 45 today, so the various conditions will impact differently.
Heart disease, cancer, strokes and many other illnesses exhibit a greater toll as we grow older, so the inferences drawn from table one may not be applicable to many existing clients.
The problem that condition counters run into is one of relevant values. Earlier CI plans incorporated early-stage prostate cancer within the main cancer definition, and coronary angioplasty was a commonplace condition within pre-2005 plans. In additionally, heart attack, stroke and benign brain tumour claims were more likely to succeed because of less restrictive claim wordings.
If we look at a different client – £250,000 sum assured for a male smoker aged 55 – we find a distinctly different outcome. Table two shows how Aviva’s plan improved in July 1997 due to coronary angioplasty being added.
It fell away slightly in March 2000 when the requirement for permanent neurological deficit was introduced for benign brain tumour and then, in April 2003, early-stage prostate cancer was removed from the cancer definition followed shortly after in January 2004 by the removal of coronary angioplasty.
These two changes made the plan 7% less likely to result in a claim, and various adjustments in February 2007 lowered the claim potential even further. Since then, despite notable improvements and condition additions, the plan remains less effective for older male smokers.
The moral here is that advisers cannot take the addition of 30 or more conditions as proof in itself of plan superiority. The impact of different claims wordings is affected by gender, age and smoker status.
Add to this the impact of premium hikes, the possibility of changes to health and the nature of the problem becomes apparent.
CIExpert cannot assist with the latter two problems but is able to provide a clear view of the various plan differences and the impact of such variations.
Alan Lakey is director of CIExpert
Male Aged 25 - Non-Smoker Sum assured £250K
Male Aged 55 - Smoker Sum assured £100K