Peter Connor NDF Administration As medical science advances rapidly there is a requirement for ...
Peter Connor
NDF Administration
As medical science advances rapidly there is a requirement for providers to look innovatively at product design.
During a typical 25-year policy some conditions, which are regarded as critical, will in the future cease to be so, while others, which are not currently listed, will become more important.
Reviewable definitions will make sense for both the client and the industry; ensuring clients are fully protected for all relevant conditions while not having to pay for cover which is no longer appropriate.
Association of British Insurers (ABI) members are obliged to use the recommended set of definitions for new policies. Importantly, the wordings are reviewed every three years to take into account advances and changes in medical practice.
Advances in detection has resulted in the discovery that prostate cancer was more common than previously thought and that a number of men with a minor form of this cancer can be dealt with.
In addition, a new method of detecting heart attacks using troponins has been introduced, improving the identification of a heart attack. The definitions were amended to ensure that a client who has such symptoms would be included.
NDF Administration considers reviewable definitions to be the future for CI and believes that the whole market will eventually move towards this approach. Products that are tied to the ABI's definitions will be secure from undue definition changes for core illnesses.
Nick Kirwan
Scottish Provident
Introducing reviewable definitions for CI cover could undermine the whole reason for taking out a protection plan in the first place. After all, if potential buyers cannot be sure about what the policy will cover, how will they decide if they need the cover in the first place? For advisers, this means policies would be harder to sell.
Having reviewable definitions is a step well beyond having reviewable premiums. This is because consumers are already used to premiums going up. No one likes having to pay more for things but we all accept the inevitable ' that most things go up in price over time.
With reviewable definitions, however, the buyer would need to trust the insurer to be fair when changing the definitions and that these changes would not be abused as a way to weasel out of paying claims.
Supporters of reviewable definitions suggest that they offer a way of ensuring that the cover stays relevant over time as medical science advances. Opponents believe that reviewable definitions are more about allowing insurers to avoid paying out too much in claims.
Either way, persuading consumers that reviewable definitions are in their interest is likely to be difficult. This could, perhaps, be partly achieved by insurers clearly setting out why, when and how the definitions might change. But even this would be viewed with scepticism unless we do more to rebuild the trust consumers have in our industry. For CI cover, this means paying all valid claims promptly and without fuss.
Dale Tranter,
Misys IFA Services.
Reassurers' unwillingness to underwrite guaranteed definitions at rates prevalent until the end of 2002 has resulted in either far more expensive guarantees (typically 30%+) or reviewable rates, where the insurer continues to offer cover but reserves the right to amend the rates as time progresses should it transpire it got its sums wrong.
NDF has pioneered an alternative approach, whereby the provider reserves the right to amend the illnesses covered as time progresses, in line with medical advances. This is fine in theory, but in practice you may get a situation whereby someone claims for an illness that is listed in his policy document, only to find the insurer took it out three years ago and replaced it with another one that he is not suffering from.
While insurers would obviously write to the policyholder with details of changes, many clients do not keep 'small print' letters sent to them by financial institutions and the situation has terrible litigation potential.
If guaranteeing current definitions is unsustainable, then the next generation of products needs a new range of ' probably more restrictive ' definitions that reassurers are prepared to guarantee.
