Mark Jones, head of Friends Provident protection proposition recently made some comments about critical illness cover.  He said, “We need to reach out to customers and give them the facts, recommending products that are relevant to the here and now.”

According to Friends Provident, Critical Illness Cover may well be the product to provide them with the opportunity to do so….

Mark points out that customers may not realise that debilitating critical illnesses are increasing. At the same time, advances in medicine mean that survival rates are higher than ever before. For example cancer death rates in the UK have fallen by 11% over the last ten years¹.

These figures mean that more people are surviving critical illnesses which also means that many of them have to cope with the long term effects of those illnesses.  Many people cannot return to work for a considerable amount of time, if at all.  Lifestyles are also effected too.  The National Statistics body cites that the number of people reporting restricted activity due to illness doubled from 1972 to 1996, and the proportion has remained relatively stable since².

Critical Illness Cover is obviously a product that can protect people against these circumstances.

Friends Provident realises that Critical Illness Cover has had negative press in the past, which has obviously deterred people from taking up the cover.  However, Friends Provident have taken positive steps to restore clients confidence in their Critical Illness Cover:

• Friends Provident pioneered the stance that the Association of British Insurer’s initiative adopted for non-disclosure. This aimed to help clients who have innocently disclosed errors on their application, so Friends Provident could pay a proportionate or even sometimes the full amount of their claim;
• Friends Provident’s comprehensive and user-friendly application forms, intelligent online eSelect system and the underwriting support they provide have all contributed to falling rates of non-disclosure;
• Defintions have been made clearer.  Clients therefore have a better understanding of the product they are taking up; and
• Recent reprices have made Critical Illness Cover more affordable, which makes it even more relevant in these financially difficult times.

Friends Provident believe that these changes, combined with more communication about the benefits of the product, are fundamental steps forward to restore  clients confidence in this product. 

Sources:
1  www.heartforum.org.uk
2  www.statistics.gov.uk

Critical Illness Cover policies usually carry a ‘total and permanent disability’ definition.  Many people view this definition as a safety net  in that if they have suffered an accident or illness that has not been one of the ‘specified’  illnesses but they still cannot return to work due to the nature of their illness or injuries,, then a claim can still be made.  The ABI (Association of British Insurers) gives the following guidelines to insurers as to what the definitions of total and permanent disability are:-

Total permanent disability

There are a number of definitions used for Total Permanent Disability. For example, “total disability” may be measured by
assessing the person’s ability to perform certain of the following:

The insured person’s “own occupation”.
“Suited occupations”.
“Any occupation” whatsoever.
A number of specified activities – for example, activities of daily living or functional ability tests.

Change of occupation

Depending on whether the definition used relies on the occupation of the person covered, this occupation may be disclosed
and underwritten at the outset of the policy. Where this applies, subsequent changes of occupation may vary the initial underwriting
assessment. Insurers normally deal with this issue in one or a combination of the following ways:

Notification is required.

The new occupation is re-underwritten and the terms of the contract are adjusted if necessary. The customer’s
ability to perform an occupation (or one that is suited, depending on the definition) is judged against the occupation most
recently notified (if all changes have been notified as required).

Notification is not required.

The customer’s ability to perform an occupation (or one that is suited, depending on the definition) is judged against the occupation
being followed immediately before the claim. In this case, the insurer accepts the risk of changes in occupation.

Alternatively, the insurer judges the claim against the occupation declared in the application, regardless of subsequent changes.

Guidelines

Insurers are free to use any one or more definitions of disability they wish, including but not limited to those shown in 6.1 above.

Insurers should make it clear in their product information which procedure is adopted in relation to change of occupation together with
the potential consequences.

If insurers require notification of changes in occupation, they should periodically remind the policyholder.

Clearly there is some room for interpretation with regards to the total and permanent disability defintions within a critical illness policy so it’s worth checking your policy to see exactly what you are covered for.  Many people think that by having a critical illness policy with ‘any occupation’ for the total and permanent disability option is better than having ‘own occupation.’  This is not the case as most people tend to stay within their occupation for life.  A policy with an ‘own occupation’ definition should pay out if you are unable to perform the day to day duties of that occupation.  A policy that has an ‘any occupation’ definition however, might not pay out in that the insurer could argue that although you are unable to perform the duties of your own occupation, you should be able to perform the duties of other occupations.

When taking out Critical Illness Cover it is important to know exactly what cover you are paying for.  A Financial Adviser will always give the customer a copy of the Key Features Document which states what Critical Illnesses are covered.  The Key Features document will usually also make reference to a seperate publication called the ‘Critical Illness Guide’ which explains exactly what illnesses are covered and what the definition of those illnesses are.  Most Critical Illness Insurance companies will adhere the ABI (Association of British Insurers) guidelines and use the 21 critical illness defintions.

These definitions are openly available from the ABI or life assurance companies direct but just in case we thought that we would break them down for you into a few bite size chunks.

Alzheimer’s disease [before age x] – resulting in permanent symptoms

A definite diagnosis of Alzheimer’s disease[before age x] by a Consultant Neurologist,Psychiatrist or Geriatrician. There must be
permanent clinical loss of the ability to do all of the following:

• remember;
• reason; and
• perceive, understand, express and giveeffect to ideas.

For the above definition, the following are not covered:

• Other types of dementia.

Aorta graft surgery – for disease

The undergoing of surgery for disease to the aorta with excision and surgical replacement of a portion of the diseased aorta with a graft.  The term aorta includes the thoracic and abdominal aorta but not its branches.

For the above definition, the following are not covered:

• Any other surgical procedure, for example the insertion of stents or endovascular repair.
• Surgery following traumatic injury to the aorta.

Benign brain tumour – resulting in permanent symptoms

A non-malignant tumour or cyst in the brain, cranial nerves or meninges within the skull,resulting in permanent neurological deficit with persisting clinical symptoms.

For the above definition, the following are not covered:

• Tumours in the pituitary gland.
• Angiomas.

Blindness – permanent and irreversible

Permanent and irreversible loss of sight to the extent that even when tested with the use of visual aids, vision is measured at 3/60 or worse in the better eye using a Snellen eye chart

Cancer – excluding less advanced cases

Any malignant tumour positively diagnosed with histological confirmation and characterised by the uncontrolled growth of
malignant cells and invasion of tissue. The term malignant tumour includes leukaemia, lymphoma and sarcoma.
For the above definition, the following are not covered:

• All cancers which are histologically classified as any of the following:
– pre-malignant;
– non-invasive;
– cancer in situ;
– having either borderline malignancy;
or
– having low malignant potential.

• All tumours of the prostate unless histologically classified as having a Gleason score greater than 6 or having
progressed to at least clinical TNM classification T2N0M0.

• Chronic lymphocytic leukaemia unless histologically classified as having progressed to at least Binet Stage A.

• Any skin cancer other than malignant melanoma that has been histologically classified as having caused invasion
beyond the epidermis (outer layer of skin).