Lifesearch senior policy adviser Matt Morris is calling for providers to list the likelihood of contracting any listed condition included in their critical illness policy, rather than adding a condition for competition’s sake.
He says: “If we had a system which quantified how likely a person is to develop each of the conditions listed on a policy, IFAs could better judge how much value they add.
.“This would also help to halt the conditions race as insurers have to move away from adding conditions to boost their overall number and focus on adding quality conditions more likely to trigger a claim instead.”
Highclere Financial Services partner Alan Lakey has accumulated statistical evidence on this very issue. According to Lakey’s data, which he collated using a number of sources including reinsurance data and NHS figures, there are 275,000 heart attacks each year. Around 266,000 people suffer a stroke, while 44,000 people are diagnosed with breast cancer and 18,500 men diagnosed with bowel cancer each year.
One in 100,000 men aged 30 are diagnosed with a benign brain tumour each year, while third degree burns equates to 10 people per one million. Aplastic anaemia effects two in every one million, encephalitis effects 20 people in every one million and paralysis 50 people per one million.
Bright Grey and Scottish Provident head of product development and technical support Ian Smart says the information gathered by quantifying data like this could be used in a number of ways. He says: “It could be used by advisers to decide whether the latest illness added to a product is worth worrying about. This could therefore at least slow down the illness race, if not stop it all together.”
But Smart warns that only quoting one statistic or incidence rate across the whole of the insured population could be misleading unless it is explained carefully.
Pru Protect director of protection development Kevin Carr says: “As an industry we cannot use overall lifetime incidence statistics such as ‘one in three people will get cancer’ because the policies end at a certain age - the FSA put an end to this a while ago and called it scaremongering.
“There is also a concern that this could lead to more providers offering inferior products that only cover the more frequent conditions as consumers would be encouraged to focus on the higher incidence conditions, which would be a move away from comprehensive cover, that could lead to fewer claims that might have otherwise been paid.”
Similarly, CBK Colchester principal Peter Chadborn says: “If information is presented showing the likelihood of diagnosis of certain illnesses are extremely low, it could have the effect of making the importance of the policy broadly irrelevant to the extent that consumers may deem it unworthy of financial commitment.”
Source: Money Marketing 27th October 2009
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