Recent bad press on critical illness products is due to bad designs, protection specialist Alan Lakey has said, as he repeated calls for market action to prevent clients discovering too late they are not covered.
CI policies have recently come under fire again for failing to payout when consumers needed them most. A national newspaper highlighted the plight of two people whose policies did not cover critical illnesses they developed.
Mr Lakey, director of protection specialist website CIExpert, said the insurance industry needs to design much broader plans which may be expensive but provide comprehensive cover.
These would also avoid the current scenario where providers name multiple conditions, but do not ultimately help if someone develops another rare condition.
He gave the example of a typical CI plan, which would cover neurological conditions such as Alzheimers, motor neurone disease, Parkinsons and multiple system atrophy, but not more obscure aliments.
“What we should do is to simply say we will pay if there is any neurological condition which has this impact, rather than naming the specific condition.”
While widening the scope, Mr Lakey said insurers are increasingly adding in specific neurological conditions, which does not help because neurological conditions are being redefined all the time, including diseases such as Devic’s disease
“It’s rather foolish to name those conditions if some poor person gets a rare condition with the same outcomes, tremors, etc, yet are not covered. That’s the foolishness of today’s product design.
It’s the old adage of buying a three-wheeled car. You get what you pay for. CI is no different. Alan Lakey“It needs a brave insurer and reinsurer to turn around and say we are going to break the mould and design a plan which will cover more people and conditions.”
David Hollingworth, associate director at London & Country, said it was unfortunate to still see bad news stories about protection products, as it underlined consumers’ suspicions about whether their plan would pay out.
He said: “It will in most cases and can really help families deal with a stressful period. It’s unfortunate when for most people the situation should have resulted in a payout but they missed out due to a technicality.”
However Mr Lakey also turned the spotlight on advisers, saying said some do not read the wording of plans and are not fully aware of limitations that may apply.
“They don’t understand the contracts or the subtle differences between the companies. Some will remove exclusions, or there may be some slight nuance within the wording which impacts the potential to claim, and advisers are unaware they are there.”
Better adviser education is needed, he said.
“Consumers will not read the often long brochures, meaning the onus is on an adviser to make a decision based on applying a value to conditions and using methodology, including comparing today’s plan with older plans.”
