Although insurers have had a year to comply with the new ABI Statement of Best Practice on critical illness, many have failed or just scraped under the deadline of Ist May 2007.
To be fair, several leading insurers have amended their wording well in advance. Most of these have also gone beyond the minimum requirements and added cover for a wider range of illnesses.
Some insurers have still to amend their covers. Others have done so during April but have struggled to update consumer website information.
The whole point of the ABI initiative is for customers to have a clearer explanation of what their product does and does not cover when they buy it and if they need to make a claim. This should also lead to fewer declined claims.
Key changes to the ABI ‘Statement of Best Practice for Critical Illness Cover’ include:
- A new standard description of Critical Illness to help ensure that you see a consistent explanation of the product. The wording is as follows: ‘Life and critical illness cover pays out a lump sum if you either die or are diagnosed with a critical illness that meets our policy definition. We only cover the critical illnesses we define in our policy and no others’.
- Better descriptions of the illnesses covered. This means that even if you don’t read the full definition, you will get a much clearer view about what is covered and what isn't; and
- Improvements to definitions of each critical illness covered, so that there is less room for doubt about when you should make a claim.
Over 12 million adults and children are covered by around five million critical illness policies that have paid out over £1.6 billion since 2000 to people who are critically ill. These changes aim to ensure that the product continues to meet this essential consumer need at an affordable price.
To those insurers who have produced clear information, and added extra benefits and illnesses; well done, and keep innovating.
To those insurers who have struggled to make the deadline, missed it, only changed cover to the minimum ABI requirement; shame on you, and don’t ever bleat again about the low numbers taking out the cover.
A reminder of the basics of Critical Illness cover:
What is it?
Critical illness cover pays out a lump sum if you are diagnosed with certain illnesses. The illnesses covered will be specified in the policy along with any exclusions – these differ between insurers. Critical illness policies only pay out once, so are not a replacement for income.
What are the main features?
Before you take out cover, here are some things to consider:
- Critical illness cover pays you a lump sum if you are diagnosed as suffering from one of the specified illnesses.
- Policy summaries will often set out a list of illnesses covered, but this is only a guide and full details will be in the policy document. This will also set out the criteria that have to be met before the insurer will pay a claim. As an example, in the case of cancer, not all cancers or stages of cancer are covered. And for heart attacks, the insurer will need to have medical evidence of the severity of the condition before paying a claim.
- It does not cover simply any sickness that affects your ability to work – it is specific about which illnesses are covered.
- Some insurers exclude all pre–existing conditions but others will decide on the basis of your personal medical history.
- It differs from other types of protection insurance such as income protection or payment protection, so make sure you understand what it does and whether it is right for you.
- Before you take out the cover, the firm should give you either a Policy Summary or Key Features document. This will set out the key features and benefits, as well as any significant or unusual exclusions.
- Many insurers now provide a plain English guide to the illnesses covered.
- If the insurer imposes any other conditions, perhaps because of your own or family medical history, you should be told what they are before you take out the policy.
- Detailed policy terms and conditions will be provided in the policy document the insurer will send you after you take out the cover – make sure you read it so that you know what you're covered for.
If you've decided critical illness insurance is right for you
- It's essential that you give full, honest answers to questions you are asked about both your own and family medical history. Giving incomplete or wrong information could invalidate your policy and any claim you make on it.
- If you are not sure, it is better to mention things. Otherwise the policy may not pay out when you need it.
- Many insurers will allow you to send medical information directly to their Medical Officer, so if you do not want to discuss personal or sensitive information with the sales adviser, ask about this.
- Bear in mind that the premium the salesperson quotes to you is only an estimate. The insurer will confirm the actual premium, and the terms, after it has considered your medical history.
- Make sure you understand what the policy covers, when it will pay out and when it will not.
- Read the documents you are given and ask questions if you don't understand anything.
- Remember it only pays a lump sum. If you want insurance to cover lost income or your mortgage repayments, there are other types of insurance that might be more suitable for your circumstances.
Life insurance: Hot Topic: May 2007
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