Your Industry  

Importance of scope of CI cover

This article is part of
Guide to Critical Illness

Covering a large number of rare and obscure conditions that nobody is likely to claim for is, in some ways, meaningless, says Steve Payne, managing director of protection at Friends Life.

He says providers should be focused on the quality of an offering, particularly concentrating on the conditions most claimed for, rather than the quantity of rare conditions covered.

On average, in 2012, 60 per cent of critical illness claims were for cancer; 13 per cent for heart attack; 6 per cent for stroke and 5 per cent for multiple sclerosis, figures from Defaqto reveal.

Article continues after advert

Benign brain tumour accounted for 2 per cent of claims; coronary artery bypass accounted for 2 per cent of claims and 1 per cent heart valve replacement, Defaqto statistics show.

Other conditions accounted for less than 1 per cent or did not result in any claims at all, Defaqto has found.

Chris McNab, critical illness product manager at LV, says cancers account for more than 50 per cent of claims received by his company.

The number of illnesses that critical illness policies cover has significantly increased across the board over the last few years.

The wider the scope of critical illness the better, says Defaqto's Mr Heffer.

However, Mr Heffer says as can be seen from the claims statistics seven critical conditions – cancer, heart attack, stroke, multiple sclerosis, benign brain tumour, coronary artery bypass and heart valve replacement - account for 90 per cent of claims.

Therefore Mr Heffer says, while it is desirable to choose a policy with a wide range of conditions, it is not wise to pay excessively more for it.

In the past, he says the trend has been for providers to add more conditions to their policies; some have as many as 56 and PruProtect's serious illness contract claims as many as 165.

On average, Mr Heffer says there are 49 conditions covered by the average critical illness policy.

More recent trends have been about improvement in definitions, Mr Heffer says, as the so-called ABI Plus conditions that use more favourable definitions than the model wording have become increasingly common.

Mr Heffer says some of these enhancements do not necessarily result in more claims being paid however.

Most recently, Mr Heffer says attention has turned to improving still further the important covers like cancer and heart attack and these changes are to be welcomed.

Chris McNab, critical illness product manager at LV, says we have also recently seen providers offering partial payments for people with earlier stage conditions.

Many providers now offer partial payments on the most common conditions such as prostate and breast cancer.

This means that providers are able to offer much needed financial support to clients for a period of time even if their condition may not qualify for a full payment.

Customers need to clearly understand which illnesses are and are not covered in the policy as these vary significantly between providers, Mr McNab says.

It is also important to look at how severe a condition needs to be before the insurer pays out, says Mr McNab.