The insurer has changed both the sum paid for child cover and the maximum payout per child.
Previously, the company had a fixed payment of £50,000 for ‘Group 1 conditions’ - ie, more serious conditions such as cancer - and a fixed payment of £25,000 for all ‘Group 2’ conditions - deemed less serious.
This meant a flat premium of £7.50 per month per child for an adult looking to add to their critical illness policy.
Now, the sum paid will change to the lower of £50,000 or 50 per cent of the sum insured for Group 1 conditions, and to the lower of £25,000 or 25 per cent of the sum insured for Group 2 conditions.
By linking the payment to the sum assured with a cap of £50,000, AIG will charge advisers' clients what is covered, rather than a flat fee.
Lots of advisers are still fixated on cost.Alan LakeyThis change, according to Alan Lakey at CIExpert, will make policies with sums assured under £100,000 cheaper.
Alongside this change to the premium, the insurer has also said it will now pay out up to £75,000 per child, and allow two claims – one under Group 1 and one under Group 2.
Previously, the maximum total payment per child was £50,000. This could be a single claim under a Group 1 condition or two separate claims.
“Lots of advisers are still fixated on cost,” Lakey told FTAdviser. “This [fixed cost] has not resonated with all advisers and with child cover now optional the additional fixed cost of £7.50 per month appeared expensive.”
Back in October 2020, AIG made wholesale changes to its ‘Your Life Plan’. Children’s critical illness payments were ‘simplified’, meaning a fixed monetary sum was paid rather than the usual percentage of the sum insured with a monetary limit.
Lakey said AIG’s decision to return to the “tried and trusted” maximum sum and percentage method which also allows the insurer to reduce the cost of the optional child-cover component.
“The changes have the beneficial effect of allowing two child claims to an overall total of £75,000,” he explained.
Neil Davies, AIG’s commercial director, said every family should have critical illness insurance that suits their needs and budget.
“We’ve linked our children’s benefit amount to the adult’s sum assured to broaden that availability, and children’s cover has two payment levels that parents can claim on if their child suffers a critical illness,” he explained.
“It pays £50,000 or 50 per cent of the sum assured, whichever is lower, if the child has a serious condition such as a Group 1 condition, and it pays £25,000 or 25 per cent if they also have a Group 2 condition – meaning payments can total up to £75,000 for each child.”
The insurer also still doubles children’s cover payments if treatment is required overseas.
AIG is not the only firm to make changes to its child cover. Royal London has added a handful of new definitions to its critical illness cover, including key changes to child cover which it said will help it pay more claims faster.
Experts said changes made by the mutual could see claims paid out on bacterial meningitis.
ruby.hinchliffe@ft.com
