Protection for people with diabetes

Diabetes is an increasingly common condition in the UK, with almost one in 20 people diagnosed with it. With the numbers expected to rise further still, insurers are looking at ways to help those who develop the condition.

There are two main forms of diabetes, type 1 and type 2. Type 1 is more rare, affecting between 5 and 15 per cent of all sufferers, and it develops when the body is unable to produce insulin or when the insulin-producing cells are destroyed. It usually occurs before age 40, but especially in childhood, and is treated with daily insulin injections.

The more common form of the condition, type 2, occurs when the pancreas doesn’t produce enough insulin to maintain a normal blood glucose level or the body becomes insulin resistant. It normally occurs after age 40 but, with its link to obesity, more and more younger people are developing the condition.

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Cover for diabetes

Although the number of people with diabetes is rising, insurers have tended to shy away from offering cover on critical illness insurance products. But this is beginning to change.

While cover for type 2 diabetes is not available, it is possible to take out critical illness insurance that includes type 1 diabetes. The choice is fairly limited, with just three insurers – Friends Life, which has offered it for several years, and more recent market entrants, Ageas Protect and PruProtect – offering it.

“It is a condition that worries consumers so we worked with our reinsurers to develop cover that would be of value. Our reinsurers charge us for the additional risk associated with this cover, which indicates that there is a likelihood of claims” says Steve Casey, head of marketing and propositions at Ageas Protect.

Each insurer takes a slightly different approach. For instance, while Friends Life offers a full payout on its plan, Ageas and PruProtect offer a partial payment, limiting it to 25 per cent and 15 per cent of the sum assured respectively with Ageas capping the maximum payout at £25,000 (see Table 1).

While it offers a more generous payout, to limit its exposure Friends Life restricts cover by age, only paying out where diagnosis occurs after age 40.

Cover limits

With these different conditions, the generosity of cover will depend on the sum assured and the age of the policyholder. For example, analysis by CIExpert, shown in Table 2, shows that a 30-year-old with £50,000 of cover would receive £12,500 of benefit if they claimed with Ageas Protect; £7,500 with PruProtect and, because of their age, nothing from Friends Life. If he or she had £500,000 of cover, Ageas would pay £25,000 and PruProtect £75,000.

If the claim was made at age 40, the outcome would change completely. Although the payments from Ageas and PruProtect would not change, the policyholder would receive the full sum assured from Friends Life.

While selecting the most suitable policy is certain to come down to more than an appraisal of the potential size of a claim for diabetes, with both Ageas and PruProtect adding this cover in September 2013, it is expected that other insurers will follow suit. Ben Heffer, insight analyst for life and protection at Defaqto, says it would be a good addition to a critical illness product, especially as a partial payment. “Adding it as a partial payment limits the risk to the insurer while providing a useful benefit to the policyholder,” he explains.