Over the past 18 months Disease of the Month has concentrated on the underwriting approach to various medical conditions. We now intend to look closely at the issues faced by IFAs when discussing critical illness with their clients.
Initially, we need to look at what critical illness cover is and why it has been developed. Many life offices use the name critical illness, while a few still call it 'dread disease' and others, serious illness benefit.
These names conjure up the vision of a cover available to individuals who, if they become seriously ill with a life-threatening or disabling disease, can claim payments to offset any financial hardship that arises as a result.
Policies are designed for a number of reasons, including providing a lump sum to repay a mortgage or to ensure funds are available during periods of rehabilitation.
Cover also extends into the business markets in the form of keyperson and shareholder protection.
The critical illness that generates the most enquires about the extent of cover is cancer. We are probably all aware of relatives, friends or acquaintances who have suffered from cancer, and their treatment may have involved chemotherapy, radiotherapy or surgery.
Occasionally, the cancer spreads throughout the body and it goes without saying that these serious forms of cancer are covered, with the exception of two scenarios described in the Association of British Insurers' (ABI) definition.
There are a number of conditions that can cause confusion. As a reference point we should look at the critical illness definition for cancer which includes a number of specific exclusions.
The ABI critical illness definition for cancer is: "A malignant tumour characterised by the uncontrolled growth and spread of malignant cells and invasion of tissue. The term cancer includes leukaemia and Hodgkin's disease but the following are excluded:
l All tumours which are histologically described as pre-malignant, as non invasive or as cancer in situ.
l All forms of lymphoma in the presence of Human Immuno-deficiency Virus (HIV).
l Kaposi's sarcoma in the presence of any HIV.
l Any skin cancer other than malignant melanoma."
The definition includes a number of medical terms that are not readily understood by most people - in particular, terminology such as tumours, pre-malignant, non-invasive, cancer in situ or skin cancer other than malignant melanoma. They may contribute to an expectation that the condition will be covered under the definition. More fundamentally, it may foster an impression that insurers will hide behind the small print of their policy conditions.
An understanding of these terms will help you determine whether or not a tumour meets the cancer definition.
Tumours
Everyday language has somewhat corrupted the term 'tumour'. In reality tumours fall into two groups: benign or innocent tumours and malignant tumours. Many people hear the word tumour and immediately think the worst. But they may have a tumour that can be easily treated or require no treatment whatsoever, with no adverse effect on their lifestyle. As a result, benign or innocent tumours are not covered under the cancer definition with the exception of certain benign tumours that may be covered under the benign brain tumour definition.
Pre-malignant tumours
Some tumours are non-cancerous but if left are known to undergo changes that make them malignant. Examples of such tumours include junctional naevi or intradermal melanocytic naevi. Once again, these tumours are easily treated either on an outpatient basis or as a day case and will have no effect on a person's lifestyle.
Non-invasive
A benign tumour is non-invasive, that is, it will not spread into surrounding tissue. On the other hand, a malignant tumour does spread - destroying surrounding tissue and ultimately spreading to distant sites in the body.
Cancer in situ
This term literally means that a malignant tumour is present but there has not been any spread to surrounding tissue. However, if left the tumour may spread and develop into a more serious condition. Cancer in situ is sometimes encountered after a woman has had a smear test.
The condition is normally treated immediately by one of the following treatments:
l Coning (the surgical removal of cone-shaped tissue from the cervix).
l Diathermy (heat treatment).
l cryosurgery (freezing).
l Laser.
l Hysterectomy in extreme cases.
Once the treatment has been undertaken women will normally undergo follow-up smears to check that the tumour has been eradicated completely. Most of these treatments can be performed on a day patient basis and once again often will have little effect on lifestyle.
Skin cancer other than malignant melanoma
Many skin cancers demonstrate some of the features discussed above. If a tumour is removed it is normal to send the sample off and obtain a biopsy. The majority will be returned confirming the tumour was benign, pre-malignant or non-invasive and therefore will not be covered.
A malignant melanoma is the one exception. This is a tumour that can grow rapidly and invade tissue elsewhere in the body. Failure to treat it will eventually result in the death of the sufferer.
In the given examples there is a recurrent theme that the critical illness only covers those cancers that are malignant, require extensive treatment and will have a serious impact on the lives of sufferers. Many will be life threatening and time off work will be required in order to receive the treatment necessary to try and check the progress of the disease. Such circumstances are likely to generate some degree of financial hardship, hence the need for critical illness cover.
This is in extreme contrast to some of the more minor tumours excluded from the cover. In general, little time is needed off work for these and the tumours are not at the stage where they could be considered immediately life threatening. Furthermore it is difficult to quantify how these easily treatable tumours are likely to result in a financial hardship. Certainly not to the extent of needing a sizeable benefit payment.
The cancer cover traditionally provided by critical illness insurance has been priced on the basis that only the more severe forms of cancer are covered by the definition. If the definition were to be widened to include many of the treatable cancers discussed then this would have a dramatic effect on the number of claims submitted and paid. A dramatic increase in premiums would be the inevitable consequence.
While there will still be many claimants who feel hard done by because their condition is not covered, the industry has deliberately kept the definition narrow. By covering only the more serious cancers, this important cover remains affordable to the majority of people.
Nigel Kirkpatrick is individual protection underwriting support manager at Scottish Equitable
