Critical illness cover is an invaluable financial protection tool. Even more so in recent years as insurance companies have striven to meet the great percentage of claims.
The statistics are impressive. According to the navel-gazing Association of British Insurers, more than £1bn was paid out in critical illness claims last year, at an average pay-out of just under £68,000. Enough to keep many wolves from numerous families’ doors at a time of great turmoil.
More reassuringly, more than 92 per cent of claims were met. Put another way, fewer than eight of every 100 claims made were refused. Impressive.
At the time, the figures prompted Raluca Boroianu-Omura, the association’s head of health and protection, to trill with excitement like some exotic South American parrot.
She said: "Serious illness or injury can occur at any time and will inevitably cause strain on families financially, as well as personally. Products such as income protection, life insurance and critical illness cover improve the financial resilience of individuals, households and businesses and give peace of mind." Well trilled. I trill in support.
Yet it seems critical illness is now a victim of its own success. The more claims that are routinely met, the less profitable the cover becomes for those insurance companies that provide it and the reinsurers that end up meeting the claims.
Rather than rejoicing at a product that delivers what it says on the tin – and going out and boosting sales by trying to convince every homeowner that it is as vital a protection tool as life cover – the insurers are now looking at ways to cut costs.
The evidence is clear. In recent months, the ABI’s critical illness working group has been seeking opinions from specialist protection advisers on proposed changes to the statement of best practice. Some of these are not in the best interests of consumers.
This working group has been existence in one shape or form for 18 years – and we have John Joseph of John Joseph Financial Services to thank for its creation.
It was Mr Joseph, a protection insurance specialist, who first drew attention to the bizarre wording used in many insurers’ policy terms and who called for greater conformity. The working group was born and the statement of best practice followed – a document that is reviewed and updated every three years.
Although the statement, in theory, is designed to protect consumers and help them better understand critical illness products, I am not so sure that is what the working group necessarily thinks. It looks more like a smokescreen to push through detrimental change.
For the record, the working group is now entirely made up of representatives from insurance companies and does not include a single protection adviser or consumerist among them. No wise insurance brain such as that owned by Alan Lakey of Highclere Financial Services (drawing on all the exhaustive research he has done at CIExpert) or James Daley of Fairer Finance. Just the voice of profit-conscious insurers. Enough said.