Insurers ease illness criteria
By Josephine Cumbo
Critical illness insurance (CII) is becoming better value as more insurers are enhancing their policies, but holding their premiums.
In recent months, a number of providers have increased the range of conditions they will cover, or widened their illness definitions to reduce the number of declined claims.
CII pays a cash lump-sum on the diagnosis of a range of illnesses – most commonly cancer, heart attack and stroke. But insurers will consider claims on conditions only if they are specifically listed in the policy and the diagnosis meets a tightly-worded definition in the small print.
However, Legal & General (L&G) has now enhanced its definitions for 11 illnesses, “over and above” the wording set by the Association of British Insurers (ABI), the industry body.
“These new definitions are aimed at improving clarity for consumers and reducing claims declined for not meeting policy definitions,” said L&G. “Pricing has not been affected by these enhancements.”
L&G is just the latest insurer to tweak its definitions and to brand its enhanced policy as “ABI+”, indicating that it exceeds the industry standard. Zurich, LV=, Fortis, Aviva and Axa have also recently made policy enhancements.
Changes common to all include the removal of age limits for claims involving Alzheimer’s and Parkinson’s diseases. In addition, a requirement for “typical” clinical symptoms in order to pay heart attack claims has been removed on some policies.
“Providers have wearied of competing over the number of conditions they will cover,” said Ben Heffer, an analyst with Defaqto, the market analyst. “Instead, they have turned their attention to the ‘ABI+’ race.”
When buying a policy, these definitions are more important than the number of conditions covered, according to advisers.
Defaqto found that the average number of listed illnesses has grown from 27 in 2005 to 34 in 2009 – but 80 per cent of claims were still for cancer, heart attack, stroke and multiple sclerosis.
Matt Morris, senior policy adviser with independent financial advisers LifeSearch, said: “While it’s always useful to be covered for as many conditions as possible, it becomes a problem when all an insurer does to make their product competitive is add obscure illnesses. The right policy varies from client to client and depends on a number of factors – number of illnesses covered and ABI+ definitions being two examples.”
Customers with existing cover should take advice before switching to an enhanced policy, though – as their illness definitions might be more generous than the new ones on offer.
Buying tips
●Check discounts and exclusions for pre-existing illnesses
●Work out whether guaranteed premiums will be cheaper than reviewable premiums in the long term
●Ask if a policy offers benefits such as counselling
●Consider an index-linked policy that increases benefits in line with inflation.
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