The Association of British Insurers' (ABI) recently published critical illness (CI) review received a rather lukewarm reception after it became apparent the industry is still deeply divided on the matter.
The review, published in August, unveiled proposals suggesting that CI insurance policies may be future proofed. It also proposed to offer two levels of cover for cancer, with one having a more restricted cancer definition, allowing insurers to offer restricted or staged cover.
However, only hours after the proposals were made public, cancer care charity, Macmillan Cancer Relief, slammed the review saying the suggested definitions would make it harder for people to claim when they are diagnosed with cancer.
"This is yet another blow for cancer patients, many of whom cite financial difficulties as second only to pain as a cause of stress. If you have just been diagnosed with cancer, the last thing you want to do is have to prove to your insurance company how ill you are," said Ayesha Owusu-Barnaby, head of campaigns and public affairs at Macmillan Cancer Relief.
The charity also argued that the changes could even challenge the product's viability. Owusu-Barnaby said: "What point is there taking out critical illness policies in the first place if they will not pay out if you are diagnosed with the UK's biggest killer disease?"
Disagreeing with this view, Roger Edwards, products director at Bright Grey, said the charity may have "missed the point" of the consultation.
"The main aim of the consultation is to leave the level of cancer cover at its current level but to future proof the definition so that in future there are less claims for types of cancer for which cures are found," said Edwards.
The 2005 review also received a mixed response from intermediaries.
Peter Chadborn, principal of Chadborn Baker & Kearle, said: "I am not a big fan of future proofing, and I am certainly not in favour of when the ability to claim is a moving target. I would feel uncomfortable advising on that type of product."
Responding to the criticism, Nick Kirwan, chairman of the ABI CI working party, said: "I would say exactly the opposite. One of the advantages with future proofing is that it should lead to a more stable set of definitions than we have had in the past.
"And although I could under-stand advisers' concerns, this is the best way to actually address this problem."
"I would encourage everybody to read the consultation paper and then come back to us with their comments," added Kirwan.
The consultation will close at the end of November and an updated version of the statement of best practice is expected to be published in Q1 2006.
THE ABI WORKING PARTY HAS PROPOSED THE FOLLOWING CHANGES:
- Improving clarity - The ABI will be consulting on introducing measures to help consumers fully understand what they are covered for.
- Future proofing - The ABI is recommending changes to improve the degree of future-proofing the model illness definitions have against the effects of medical and other advances while trying to maintain the same level of cover.
- Introducing two levels of cover for cancer - The ABI will be consulting on whether to introduce a new, more restricted cancer definition, which could be offered alongside the existing cancer definition or on its own. This would allow insurers to offer staged or restricted CI cover.
- Other changes - The ABI is recommending additional measures to improve clarity including simplifying the structure of CI.
Source: ABI Statement of Best Practice for Critical Illness Cover, 2005 review consultation paper
