Munich Re gives its views on the early stage cancer debate as part of the ABI's CI Statement of Best Practice consultation.
History shows that well established markets often come to a crossroads where changes are made.
Competitive pressures inevitably drive more product options, quicker new business processes and put pressure on claims decisions, while prices get cheaper…something eventually has to give.
Such pressure is building within the UK Critical Illness (CI) market and questions are being asked as to how we should proceed.
This is not the first time that CI has been at such a crossroads: in 2002 a major reinsurer removed capacity from the market which contributed to changes in underwriting approach and contract wording.
Recent iterations of the ABI's statements of best practice (SoBP) for CI have introduced specified severity levels for key definitions: troponin levels for heart attacks, stage 2b thresholds for prostate cancer - to try to keep the product on a sustainable path.
The fact the ABI felt this question needed to be asked should not be a surprise to the industry.
How many articles have there been in recent months discussing either the inequalities of the product at claim stage or the inherent risks continuing product developments create (depending where one sits in the sales process)?
Such debate is symptomatic of an environment where underwriting is reduced, medical science is rapidly advancing and claims decisions are subject to increased scrutiny.
Over the last few years Munich Re has publicised its own concerns about the need for CI product and underwriting changes.
CI continues to provide important and valuable protection to consumers and the approach the industry takes to its development must ensure this remains the case.
100% payment on an ever growing list of conditions, regardless of severity, is not a sustainable position when medical advancements progress at pace or access to diagnostic testing can shift unexpectedly.
We have developed alternative concepts but they require a fundamental shift from the current position. It's not an easy ask for an industry to change when it's reaching the peak of a soft cycle.
In a highly developed market where the majority of business is written by a few large players, it's commercially challenging.
The large insurers don't want to be the first to make significant product change and the smaller ones struggle to drive it.
The ABI's questions about future approach to early stage cancer coverage are the right ones.
It has created some debate which helps draw out the issues. However, in isolation and within the context of the current UK CI market, such a level of change would only serve as a step towards solving the various challenges the industry faces.
In addition, we must consider how the market might respond if early stage cancers were moved to partial payments in the SoBP.
Would insurers just retain their current cancer definition, or the current ABI model definition, knowing that it would become ABI+?
Would insurers be comfortable moving to this new ABI model definition while others become ABI+ without the need for change?
The product would be cheaper but it might not get over the best advice hurdle.
While we debate this between ourselves, there's a danger we lose sight of those who should influence us the most - the consumer who ultimately chooses (or chooses not) to purchase CI.
Those buying today's CI product already face a complexity challenge and the recent discussions around cancer definitions reminds us that this is not an easy obstacle to overcome.
The ABI's early consultation acknowledges that not all stage 1 cancers are of a similar prognosis and impact and therefore moving to exclude them all from full payment may not be appropriate.
However, differentiating between stage 1 cancers (bearing in mind some cancers have their own specific staging systems) would likely create a more complex severity style wording within the definition; explaining this to consumers adds a further potential barrier to sale.
The debate developing on the topic is the right one to have as part of an early stage consultation.
The answers to the questions posed will require more research and detailed consideration and that is how the ABI have said they will proceed.
A key consideration must be whether making tweaks to the product now, that will cause large disruption but may only result in small improvements, will address the various concerns of insurer, reinsurer, distributor and end consumer alike.
CI is a necessary and valuable protection product but it is becoming more obvious to the industry that making sure it remains so requires some change.
Munich Re suggests we use the opportunity prompted by the ABI's recent questioning to take a more fundamental look at the product and consider more wholesale changes.
We have our own thoughts here and will continue our discussions with those manufacturers and distributors prepared to make and drive significant change.
While we have these debates, we will ensure we are engaging with those ultimately buying the product.
We are doing this currently on the topic of underwriting and will share our findings soon.
Life Branch of Munich Re, London
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