The conditions that can - and should - be removed from CI plans without impacting value
Back in 2011, Carol Sergeant chaired a simple products design group whose aim was "to develop a suite of simple, transparent and easy to understand financial products".
It quickly became clear that critical illness was not considered suitable for simplification and the group moved on to easier targets such as term assurance.
Fortunately, the industry has picked up the mantle and has started making efforts in this regard. Pleasingly a number of insurers have begun reducing the numbers of conditions within their critical illness plans - a reversal of the 'here's yet another one' attitude that prevailed over the previous decade.
Both Aviva and Legal & General have removed HIV and Aviva has also done away with loss of speech in recognition of having never paid a single claim.
Of course, there is a vast amount of consolidation and purging that remains to be done and here are a few conditions that can be painlessly removed, or consolidated, without affecting the overall worth or claims-paying ability of the various plans.
Colonial Mutual first added this in August 1998 and most insurers offer this as primary pulmonary hypertension or idiopathic pulmonary hypertension, which means that the source of the condition is unidentifiable. Various registries have suggested that each year in the UK around 100 people will receive a positive diagnosis and of those many will be ineligible due to suffering from concomitant conditions or not being able to meet the precise claim requirements.
Legal & General recently removed the requirement that the condition be primary/idiopathic and there has been comment about what a step forward this is. The facts, however, tell a different story. Whilst the potential population has increased from 100 pa to around 215 pa this hides the reality that a high percentage will suffer the condition due to other causes, many of which would have resulted in a previous critical illness claim or rendered the person ineligible at outset.
The 2017/18 UK Pulmonary Arterial Hypertension Audit confirmed that 32% of sufferers already had left heart disease and an additional 13.2% with congenital heart disease. A further 20% suffered from serious lung disease with 2.6% enduring portal hypertension. Whilst the various registries provide competing figures it seems fairly clear that the impact of removing the ‘primary' requirement is to increase the potential claimants by around 65% - 100 to 165.
Insurers claims experience validates the relatively low value of this condition. When we total the last three years paid claims of Aviva, Legal & General, Royal London and Zurich we find that out of 31,005 accepted claims only two related to primary pulmonary hypertension.
Offered within most plans and better known as ‘mad cow disease' this condition was first introduced by Standard Life in January 2004. Like HIV/AIDS the disease conjured up major media interest and was added more as a form of comfort than due to anticipated claims.
Recent claims experience shows that over the 2016-18 period the combined claims paid by AIG, Aviva, L&G, Royal London and Zurich came to 31,924 of which CJD provided six claims.
When analysed, the claim wording generally mirrors that of dementia, which presents a compelling argument for its removal as a separate condition and consolidation within the dementia wording.
Pulmonary artery replacement
This condition was introduced by Fortis in September 2008 and as yet there hasn't been a single claim directly attributable to it. Whilst a rare operation, it would best be consolidated into open-heart surgery, as Canada Life did for a while, or into an overarching condition combining all heart and valve surgery.
Most advisers will not realise the low incidence of many of these conditions and may accord them greater value than they deserve, which is why CIExpert ensures that its analyses delve deep below the surface to ensure that the true values can be provided.
The industry needs to up its game so that we no longer furnish long lists of conditions, many of which are unknown to the average consumer. For advisers, this just adds to complexity and sadly increases the ranks of those deterred from engaging with protection.
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