Opinion  

From committee to compassion over critical illness

Andrew Wibberley

There have been two stories in recent weeks about non-payment of critical illness claims in the Mail on Sunday.

One was a clear case of misrepresentation, for which the appropriate action had been taken as per ABI guidelines and even in the court of public opinion of the website’s comments section.

The previous tremendously sad story was about Hein Pretorius, who lost a leg following a motorcycle accident and his two insurers have not paid his critical illness (CI) claim. The insurers’ definitions required the loss of two limbs (as per the standard ABI definition) rather than one limb.

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Unfortunately, there will always be stories like this with the current design of CI products. I want to explain why this is the case and also share what could happen to improve the situation.

Any changes to claim definitions can also change the likelihood of a claim. Data tells us many more people will lose one limb than two – and so there will be a difference in cost for the alternative definitions. The last ABI statement of best practice on CI introduced a requirement that any “ABI+” definitions must cause an expectation of more claims from the policy. This rightly means there are no “free” conditions in the numbers game that CI all too often becomes.

The chances of Mr Pretorius suffering cancer or a heart attack would have been much greater than suffering the loss of a limb, let alone two. Therefore even a thorough evaluation of policy conditions would not have focused on this particular definition.

This really highlights the difficulty of advising on and buying CI products in their current form. You could buy or recommend the product with the best 50 definitions, but if no.51 is the one you suffer from how could anybody possibly have predicted that, let alone make a recommendation on it.

Arguing improvements in definitions should be retrospectively applied to existing policyholders sounds attractive but is problematic. If your insurer can afford to do this it was probably making too much money on the policies in the first place, or the changes or number of existing customers are so minimal as to not really matter. Would policyholders rather have this change or be charged less each month for the cover they actually originally bought?

So do we accept that, sadly, difficult cases like this will always exist wherever we draw the line? Or is it possible to do something to make this better for future customers? I have three specific thoughts on how things could improve as we look ahead.

There must be more focus on keeping definitions consistent over time. Today many companies are hooked on the instant hit of press coverage and attention that comes with tinkering with definitions. If a change is made the customer advantage should be clear. This should be weighed against the confusion that changes cause to existing policyholders and the market as a whole.