There is a significant case for the industry to make big changes to terminal illness policies, writes Richard James
A recent BBC Watchdog programme highlighted issues with the current definition of terminal illness. While insurers may argue the Watchdog examples were not presented in a balanced way, yet again the industry may be forced to make changes following negative press coverage, rather than setting definitions that are transparent and clear for their customers in the first place.
A possible outcome could be that insurers react by further loosening the terminal illness claim criteria in an attempt to appease public opinion, or create inconsistent wordings across the industry. There is real momentum at the moment outside the life insurance industry concerning care and support for those who are terminally ill.
Charities are increasing their focus on health and social care policy with the aim of delivering effective and high-quality support for the patients they represent. To achieve this, a coalition of ten charities has been formed called the Richmond Group.
On behalf of this group, Macmillan Cancer Support has led a review of the banking industry, setting out how it can improve the services banks provide to customers who are living with cancer. The review highlights that those suffering with cancer should know how their bank can support them with advice on subjects such as available services, product features, wills and powers of attorney.
In addition, banks need to act effectively, swiftly and sensitively. The direction of travel is towards holistic support, and a ‘pay a claim and move on' approach is being challenged as seen within banking best practice guidelines. Can our industry really say the current terminal illness benefit captures this same sentiment? The vast majority of terminal illness claimants are cancer patients, so there is genuine alignment here.
Claim definitions
Commonly used terminal illness definitions state that for a valid claim, the claimant's illness "is expected to lead to death within 12 months". However, within the medical context, the phrase ‘terminally ill' will be used where the likelihood of survival is less than three months.
This is based on studies evaluating survival predictions from doctors, where three months seems to be the duration against which a consultant can predict survival with a degree of certainty. In addition, unless the consultant firmly believes that their patient is likely to die within, say, three months, they will generally avoid any prediction of life expectancy.
The preference, within a clinical discussion, is to focus on treatment options, success rates and action plans, to support their patient's spirit and resolve. If pushed by the patient, a consultant's prediction is more likely to be overly optimistic.
Treating consultants are in a tough position, when their patient asks them to complete a report that could result in them claiming the proceeds of a life assurance policy, based on whether they are expected to die within 12 months. Faced with the knowledge that they are unable to offer their patient the support of a cure for their disease, a consultant will possibly feel a duty to help them in other ways where they can.
To be clear, there is no inference of wrong-doing here, because the current terminal illness definition asks whether, on the balance of probabilities, the patient will die within 12 months. As previously stated, the treating consultant is not able to make an accurate prediction this far into the future, and in many instances will be guided by median survival statistics.
If used in isolation, these are not a reliable indicator for prognosis of the individual and their own unique circumstances. The industry definition appears to be at odds with that of the medical fraternity.
When a claimant believes they have less than 12 months to live, for them this is a very clear-cut position. However, the outcome can then be confused by the insurance claims assessor's own interpretation of "expected to lead to death". Influenced in many instances by underlying actuarial assumptions as to what this actually means, this will often be at odds with the consultant's opinion.
While the insurer, the consultant, the insurer's Chief Medical Officer and maybe the Financial Ombudsman debate the outcome, the claimant, who is terminally ill, cannot understand why their claim is being delayed.
In some instances, the period from initial claim notification to settlement have taken upwards of 18 months. It is indefensible to be taking months to assess a claim while the claimant's condition deteriorates.
The reason for having a terminal illness benefit on a life insurance policy is to provide quick payment so that the claimant can get their affairs in order and have financial peace of mind during their final months. In too many cases, this is not being achieved due to disagreements over whether the life expectancy is 12, 18 or 24 months.
Insurer reaction
How can insurers react to address this misalignment? Improving the information insurers request to support greater clarity of decisions from consultants is one option.
However, the underlying issue is likely to be the definition of terminal illness and the ambiguity of the current survival period. While a simpler solution may appear to be extending the survival period, our research suggests the opposite.
