If we change definitions we must be totally aware of the expectations of the customer, writes Roger Edwards
The recent ABI consultation paper on prostate cancer highlights some serious issues the protection industry has to address. The implications of these developments lie with both the price of critical illness (CI) products and the definitions used within them.
In the past, there have been understandable reactions to new medical conditions and medical thinking that have resulted in immediate premium increases, even if the perceived threat has not ultimately been borne out. The AIDS scare of the late 1980s is one such example. The paper states the introduction of new screening techniques could lead to earlier diagnoses of prostate. Presumably these new techniques will also, in time, be used for different cancers too.
This suggests providers will either have to increase premiums or tighten definitions in order to safeguard the long-term viability and profitability of critical illness products. Both these courses of action could affect the success so far enjoyed by critical illness, so we should try to avoid the typical insurer reaction to immediately assume the worst and hike premiums. Further research would, however, be desirable to predict the true impact of early screening.
A change to the definition would be preferable to an increase in premiums as many customers already perceive CI to be expensive. But a change in definition would still have to be handled carefully.
Cancer is a horrible disease and whether the prognosis is good or not, the fear that it generates in sufferers is sufficient to create problems when a claimant has a claim turned down because they have the wrong form of cancer. We can point out that early stage cancer is not life threatening but we must be totally aware of the expectations of our customers, what they think they have been sold and what they have been covered for.
The introduction of the T1 clause on the cancer definition would solve the prostate cancer problem, but unless it is handled carefully, it could create a small print perception and add to the current media opinion that CI plans never pay out.
In addition to the T1 clause, the ABI should perhaps also produce a plain English explanation about what sort of cancer is to be covered by a CI policy. The intention here would be to inform IFAs and clients that in order to be covered, the cancer has to be invasive and potentially life threatening. Companies could then build this into their definition guides and into other marketing communications.
On the assumption that as medical science advances, other cancers may become easier to detect and be treated, the ABI should extend the thinking they have applied to prostate cancer to cancer in general and adapt the T1 clause to include all cancers. This may provide a greater degree of protection to the providers of guaranteed rate critical illness products. But above all, customers' expectations and the way the extent of the cover provided is communicated to clients will have to be carefully handled.
