The two reports by the Office of Fair Trading on life and health insurance have focused the protecti...
The two reports by the Office of Fair Trading on life and health insurance have focused the protection industry's attention on improving the standards of its product offerings. Much work has been carried out by working parties across the different product sectors and many of their recommendations have already been, or are in the process of being, implemented.
The work of the ABI critical illness working party and that of the late IFAA CI working party has been among the most robust in aiming to improve the clarity and comparability of CI contracts. Last year saw the launch of the Statement of Best Practice for critical illness which set out minimum standards for all CI providers, including the requirement for key features, the use of model wordings for conditions and exclusions, and the use of generic terminology for certain aspects of the CI contract.
While the ABI Statement covers all critical illness products, since the demise of the IFAA there has been little focus on IFA-only contracts and the needs of this particular sector. The COVERmarks initiative aims to bridge that gap, providing a meaningful set of benchmarks to help IFAs select the most appropriate cover for their clients.
The COVERmarks are designed primarily to help IFAs compare the products available to them. They also aim to recognise the highest standards achievable in the critical illness market.
The criteria used are stringent and as objective as possible, but not intended to be punitive. For example, no plan will achieve the shield for comprehensive coverage if it does not cover the 20 conditions as defined by the ABI. No plan will achieve the flexibility shield if, say, it does not offer policyholders the option of taking the critical illness benefit as income or allow them to decrease as well as increase the sum assured.
This is not to say that a plan that does not achieve all five shields, or indeed even one shield, is a poor contract. It simply means there are plans available that offer more comprehensive cover/more flexibility/more innovative options.
Furthermore, in no way should the COVERmarks be interpreted as a recommendation to sell those contracts achieving more shields. The needs of the client must obviously come first. If a client does not require an all-singing, all-dancing state-of-the-art policy, then they may be better off with a straightforward plan offering core coverage perhaps at lower cost. Indeed, we have chosen to focus on quality rather than cost for the COVERmarks, but of course price will come in to the selection process, as will service to the IFA from the provider.
The three contracts which, in the eyes of a panel of independent judges, deserved all five shields were Lifecare from AXA Sun Life, Solutions from Swiss Life and SMA Pegasus' Business Assurance Plan. The three plans offer cover that is comprehensive, already ABI-compliant, extremely flexible and which demonstrates innovation on behalf of the product provider. A profile of these three contracts is provided in this supplement, along with mini-profiles of those products achieving four shields. The full results are shown on page xii. If companies/contracts are missing from the list it is because the company declined to take part in this initiative or did not provide details of their entire CI product range.
The criteria will be modified over the year, since the second shield will become obsolete once the ABI model wordings become compulsory in June 2000 . We would welcome your thoughts on what other elements of critical illness cover would benefit from a benchmark - say, clarity of marketing material, claims management or perhaps service - and we will announce the revised criteria in the autumn. We would also like to hear your comments on the initiative as a whole.
COVERmarks for income protection contracts are currently under development and we hope to carry out assessment of all IFA products in this sector during the summer.
Catherine Tennant
Editor
