How critical illness differs from other cover

There are generally two types of critical illness plan cover: increasing and decreasing, which will be suitable for clients depending on the client's financial situation. 

Scope of cover

While providers will only cover the critical illnesses defined in their policies, many providers are ever-widening the scope of the cover.

For example, in October, LV increased its range of cancers covered to more than 60 early stage cancers and included more syndromes within its Parkinson's definition.

This is understandable, as Peter Le Beau, founder of Le Beau Visage, comments: "It is difficult to keep CIC future-proofed as medical science develops.

"When CIC was launched in 1987, as 'dread disease', one of the big concerns was having a coronary artery bypass graft. Now this is a much less common and feared operation, as the stent has replaced this as a technique.

"CIC has to evolve continually to remain relevant - and this is a challenge for product developers."

CIC is also far more flexible now than it was in the past in terms of policy structure. Twenty years ago, CIC did allow for partial payments - the policy ended the moment someone claimed.

Now, as Phil Jeynes, head of sales and marketing for UnderwriteMe, explains: "There are now more complex aspects to the policy, in particular partial payments, whereby certain conditions may pay out a percentage of the sum assured without bringing the policy to an end.

"This makes CIC a more useful policy than simple life cover, as the chances of a customer dying during the term of their policy are far lower than the chances of them developing a condition such as cancer over the same period of time."

There may be concerns or a public perception that payout rates are low but this is not the case. According to the Association of British Insurers (ABI):

• 98 per cent of protection claims were paid out in 2015 across the range of policies.
• The ABI showed the average payout in 2015 on CIC policy was £66,200.
• The percentage of CI insurance claims being paid rose, with 93.1 per cent paid, up from 80 per cent in 2005.

There has been a steady increase in the percentage of claims paid since the introduction of the ABI’s Code of Practice on non-disclosure, first issued in 2008, which clarified what medical information customers needed to share with insurers.

Back in 2011, the Association of British Insurers created a code of best practice for CIC, to help advisers, providers and clients understand what they should be able to expect from the CIC policies. This can be found on the ABI website.