The ABI critical illness (CI) working party review reached a crucial stage at the end of August. Party chairman, Nick Kirwan, answers some need-to-know questions
Q. Why did the review take place?
The first Statement of Best Practice was produced in 1999 when it introduced standard definitions and wording to the market. It was decided at this time that the Statement should be fully reviewed every three years to ensure that it remained up to date. This year is the second full review of the Statement and it is the most crucial so far.
Since the last full review in 2002, fears about advancing medical science have caused premiums for guaranteed plans to rise by around 60% and there are even questions about whether critical illness (CI) in its current form is sustainable. Clearly, it would have been a missed opportunity if the ABI CI working party had not considered what could be done to address these issues so that CI continues to be available and also continues to meet consumer needs at an affordable price.
Q. What changes are being recommended?
The consultation has a number of recommendations. The main ones are to make the headings of the conditions covered more descriptive and to try to future proof the definitions as far as possible against potential future medical advances while keeping the cover at the same level.
Q. Is changing the CI definitions really going to make the product clearer? Is it not more likely that it will just increase confusion over what is and isn't covered?
The present framework means that each illness has a very broad heading and all insurers include a warning that customers should refer to the full definition for what is covered. This approach was discussed and agreed with the Insurance Ombudsman Bureau (IOB) in 1999 when the Statement of Best Practice was first published. It is worth remembering that consumers do have the added safeguard provided by the Statement that policies have to meet minimum standards and that these have been discussed and agreed with experts in the medical profession.
Of course, there is plenty of information available for people who want it. Insurers all offer their full definitions, some produce plain English guides and the ABI has also published a full plain English guide to all the medical definitions and exclusions on its website.
However, in practice, even though this information is available, consumers rarely ask to see the full definitions when they take out CI cover. So we hope that by making the headings clearer, it will make it much easier for people to get a much better understanding of what is covered - without the need to refer to other documents.
Q. How important is it to future proof the definitions? How will this work in practice?
Future proofing the definitions is really important as it involves considering advances to medical science that could be implemented or developed in the coming years. Thinking of these advances now means that, going forward, the policy definitions are less likely to need to be changed each time a breakthrough in screening techniques or treatment is made - meaning fewer versions of CI insurance going forward.
It also means that changes we are expecting to be implemented can be taken into account when pricing the product now, which will mean that the pricing is more stable in the future and may even help reduce premiums straight away - as insurers could factor in less for potential increases in claims.
In many cases, stroke for example, we are including the requirement in the definition for there to be clinical symptoms. There is no requirement regarding the severity of the symptoms or that people are unable to work. But this guards against a time when illnesses may be diagnosed many years before the illness has any effect on a person's lifestyle - for example, through advanced scanning techniques.
This does not change what is covered at present, because people without symptoms would not go to the doctor anyway and - even if they did - with no symptoms they would not be diagnosed with an illness. Of course, this could change in the future with advanced diagnostics linked to preventative treatments.
The proposed future proofing changes will affect 11 of the current definitions (a full list of which is detailed in the consultation paper). However, there is little change in the level of cover, and in some cases, the proposed new definition offers more cover than the current definition.
Q. The cancer definition is one of those that has proposed changes, one of which is the exclusion of certain types of leukaemia. Considering that the majority of claims under children's benefit are for leukaemia, it doesn't seem fair to add this exclusion, can you explain why this is being done?
The proposed exclusion for leukaemia is for a very early stage chronic lymphocytic leukaemia. These cases are not usually picked up because they do not have any symptoms, so excluding them protects against better screening in the future, which could pick them up. However, if the leukaemia progresses to a more advanced stage, then it would be covered. It is worth mentioning that children usually get an acute form of leukaemia which is a completely different type of the illness - so children's cover will not be affected.
Q. What other changes are being proposed for the current Statement of Best Practice?
The main changes are to extend the number of conditions for which a standard definition is available. The proposal is to include standard definitions for three new conditions: Alzheimer's disease with permanent symptoms; HIV contracted in the UK from a blood transfusion, a physical assault or at work; and major head injury with persisting symptoms of brain damage. Having a standard definition provides consumers with the security of knowing it meets minimum standards and allows them to more easily compare the cover between providers.
Q. Some people have said that the changes that are being suggested are just trying to make it difficult for people to make a claim. How would you respond to this?
This review is not about trying to stop people getting a pay out on their policy. Indeed, many of the changes will extend the cover. We all recognise the real need that CI insurance meets and it is very important that it is there to meet that need for the long term. This is why it needs to change to take account of advancing medical science. Medicine has advanced more in the past 20 years than in the previous 200 years, which has meant that some critical illnesses are diagnosed earlier, and treated more effectively than before.
CI insurance is there to help people pick up the financial burden when they are trying to come to terms with, and fight, a critical illness. By removing the financial worry, CI insurance allows people to focus on what is really important - picking up the pieces and getting on the road to recovery.
However, if a condition was identified before it had actually caused any significant health problems and was treated effectively within a short period, then the need for financial help is no longer there.
Q. The consultation asks whether the product name should be changed. One of the problems with CI insurance is the number of people that do not realise the product is available. The industry has been working hard to raise its profile, so would changing the name not be detrimental to this?
Changing the name of the product is not something the working party is recommending - we are purely asking the question to find out peoples' views on it. The thinking behind the question follows the same theme as changing the definition headings to make it clearer what exactly is covered.
There has been a lot of work in many countries throughout the world to ensure that the product shares a common name, to move away from this name may cause initial confusion but it could also help solve the problem of people not understanding the definition. We are really interested in hearing people's views on this.
Q. Can you explain what the reasoning behind the proposed second cancer definition is?
Firstly, we should be clear that the second cancer definition is not actually being recommended - again, we want to ask for people's views. This idea came out in the focus groups that were held with reinsurers and product providers and we wanted to get a feel for people's opinions to find out if it is something that we should do.
The idea is to have a second, more restrictive, cancer definition that could be used either on its own for a cheaper type of cover, or as part of a product that offers staged payments depending on how far advanced the cancer is when it is diagnosed. Again, this should meet consumer needs and offer more affordable cover.
The consultation is gauging opinion on this and asking how it would be implemented if it was to be available. One issue that is very important would be the need to ensure that consumers are aware of what they are buying - so an important question is how we would make this clear.
Q. What is the next stage in the consultation?
A. The consultation is out for comments so this is your chance to have your say on the future of CI insurance. After that, we will be updating the Statement and then insurers will have a transition period in which to comply with the new framework. It is important that as many people as possible reply to the consultation by answering the questions that have been posed. You can get a copy of the consultation paper in the publications section at www.abi.org.uk. All replies should be sent to the ABI by 30 November 2005.
Nick Kirwan is chairman of the ABI critical illness working party
