Only days after insurers and advisors agreed that total permanent disability should not be removed from critical illness policies, insurance trade body ABI is planning to rename and standardise definitions of the total permanent disability (TPD) benefit.
The aim is to improve clarity for consumers to reduce the number of declined claims. Many, but not all, insurers agree with the plans.
Consumers may be confused as to why a trade body dictates policy definitions on critical illness, but no other class of insurance. It is simply that critical illness is the only class of insurance where insurers sit in endless committees to agree standard wordings. Insurers work so closely with each other on this, that few are prepared to offer wordings that do not use ABI agreed phrases.
What is very puzzling about the proposals is how the ABI wants to build on the standard definitions of total permanent disability. The curious example they give is that words ‘total permanent disability’ should be removed. It is unclear how removing the words ‘total permanent disability' improves consumer understanding of total permanent disability.
Part of the plan is to educate consumers. Roughly translated this means that you are to blame for not understanding what insurers mean and for critical illness being one of the worst selling policies around.
The plans are not yet set in stone, as new definitions will be tested with consumers and intermediaries before being recommended to insurers.
The endless discussions and tinkering have never made critical illness poplar with the public.