Insurer trade body ABI has updated the guidelines for member insurers on critical illness in an attempt to improve customer understanding of a product that is struggling on sales.
The guidelines have no legal status so the trade body relies on the goodwill of insurers. Despite being released in February 2011, have until December 2012 to implement them.
This new statement seeks to improve the clarity and understanding of the total permanent disability cover in critical illness insurance policies. While this extension, which some insurers offer automatically, but others only offer as an option, only represents 3% of all claims I, a high proportion of those claims in the past have been declined, which is highly distressing for customers making the claims. The ABI unsuccessfully tried to change the name of this extension, but insurers and advisors felt the name change and new definitions confused the situation even more.
The new statement of best practice for critical illness insurance includes:
A new set of definitions for total permanent disability with more descriptive headings which will make the cover clearer, and support for an education plan to improve understanding and reduce the number of claims declined
Change in wording to the terminal illness definition in the light of changing medical science, and clarity improvements to the cancer and Parkinson’s disease definitions
The standardisation of the pre-existing conditions exclusion for children’s critical Illness insurance. For some insurers this condition is in the top five causes of claim, mostly for children diagnosed with leukaemia.
The ABI does not get involved in the design of policy wordings in other classes of insurance, so some consumer advocates argue that to do it on critical illness just removes insurer incentive for market innovation on a failing product.