The ABI critical illness (CI) working party has released its new Statement of Best Practice - here its chairman, Nick Kirwan, answers questions on what it contains and the future of CI
What were the main objectives of the review?
The key objectives of the review were, in conjunction with other ABI initiatives, to tackle the key issues facing CI - sustainability and affordability and the product's reputation.
The main issue is declined claims. These primarily happen for two reasons: non-disclosure - which is being addressed by the recently published ABI work on clarity of application forms - and claims that do not meet the definition of what is covered.
This latter point suggests that we need to be clearer about what is, and isn't, covered. The ABI review addressed the clarity of cover at two levels: at the policy level, by having a standard description of CI, and at the individual definition level by having more descriptive definition headings. Together, these measures should go a long way towards making every step of the process, from application to claim, clearer for consumers.
On the sustainability side, there has already been a lot of work done by the ABI on reviewable premium products. This review looked at how we can have definitions that maintain the current level of cover but which require fewer changes going forward. This should lead to greater consistency and better understanding about what is covered.
None of these measures would achieve anything if they didn't go down well with consumers. That's why we conducted consumer research to ensure that the changes achieved the better level of understanding we'd aimed for.
Why is there a need for a standard description of CI and what is it?
Having a standard product description is about providing a straightforward explanation of the cover so that people know exactly what they are taking out. By ensuring that all insurers use this in their marketing material, consumers will see a consistent explanation of the product to reinforce the message over and over again.
The consumer research tested a number of points for understanding - for example, how the policy works, what is paid out and that only the critical illnesses defined in the policy are covered. The description that consumers found clearest was:
"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."
Insurers will be able to amend the description in prescribed ways to take different scenarios into account - for example, stand-alone policies and those that pay an income.
Exactly what is meant by more descriptive definition headings?
To help ensure that consumers are clearer about what each illness definition covers, we have made the headings of the illnesses clearer and more descriptive. This means that even if consumers don't read the full definition, they will get a much clearer view about what is covered.
An example of how this will work would be for cancer. If someone looked at the current list of illness headings and just read "cancer", unless they read the full definitions or the warnings in marketing literature, they might wrongly get the impression that all types of cancer are covered.
We owe a big thank you to both Macmillan and Cancer BACUP for their help in coming up with a list of possible descriptions for the consumer research.
The new heading which consumers found clearest and which best conveyed the scope of the cover was "cancer - excluding less advanced cases".
The use of these more descriptive definition headings was received extremely favourably during the consumer research. People felt that it made the cover much clearer and showed that insurers weren't trying to hide anything.
What are the main changes to the illness definitions?
We've made some changes to the definitions to try to ensure that fewer changes are needed at future three-yearly reviews of the Statement. We've tried to do this in a way that doesn't change what we currently cover but there are some small differences. The main changes are:
Cancer - we've removed the HIV related cancer exclusions and tried to remove the grey areas on borderline cases to be clearer about what is and isn't covered, especially for cases of leukaemia.
Heart attack - we've extended the requirement for chest pain to include other clinical symptoms and incorporated troponin levels (as used by the British Cardiac Society) into the definition for extra clarity.
Stroke and degenerative illnesses - we've made it clear that these are covered from the point where there are ongoing clinical symptoms (as currently happens in practice).
We hope that, over time, people should have a better understanding about what is and isn't covered through these new definitions. We should also see fewer situations where people have two policies and one pays out and the other doesn't because they come from different "generations".
We've removed the confusing "core" and "additional" categories which are no longer relevant. And we've extended the generic terms that can be used as part of the critical illness definitions to improve consistency and clarity.
To make products clearer and easier to compare, we've added another three standard illness definitions:
Alzheimer's disease before age xx [each company will dictate its limit] - resulting in permanent symptoms.
HIV infection - caught in the UK from a blood transfusion, a physical assault or at work in an eligible occupation.
Traumatic head injury - resulting in permanent symptoms.
Here, again, you can see how we've used more descriptive headings to be clearer about what is covered by each definition.
What guidance is being given around statistics and other information?
Last year the FSA raised concerns about the use of scaremongering tactics to sell policies. We've taken this on board and as part of the consumer research we asked consumers where they see the boundaries between "scaremongering" and "informing". In particular, we wanted to find out what sort of information consumers find most helpful in reaching an informed decision.
To do this, we pulled together a whole range of statistics about specific illnesses and poor health in general, information about diseases, claims data, and other related facts from a variety of sources - including charities, Government departments and insurers.
The main finding was that the use of statistics in marketing material is not seen as scaremongering. The information was seen as most helpful when the statistics are relevant to the message.
For example, using claims data and statistics relevant to the illnesses covered by the policy were generally seen as helpful in making an informed choice.
The information was less well received if it was seen to be trivialising the subject or irrelevant (by not being specific to the subject). Consumers made the important distinction between "scary" and "scaremongering" - indeed, some of the more scary statistics were found to be the most informative and helpful.
Although there were no statistics or other information that they found to be scaremongering, most felt that it would cross that important line if, for example, the information became too personal. For example, directly relating statistics to them or their families.
So based on our consumer research, the guidance for insurers and intermediaries who are looking to inform their customers is that it is fine to provide information and statistics, but make sure that the information is relevant to the policy you are marketing.
Statistics should be from a reliable source which is clearly stated; and the information needs to be reasonably up to date - don't use statistics from the 1990s.
Provided these guidelines are followed the industry should find that most people will view the information provided as both helpful and informative.
Where can people get full details?
The revised Statement of Best Practice will be published on the ABI website, www.abi.org.uk. This gives the new standard product description and the more descriptive headings, the generic terms and all the new definitions together with examples of how these should be presented in policy summary and key features documents.
The CI review has been discussed as the saviour of CI. Will it live up to expectations?
The changes contained in the new Statement of Best Practice should go a long way towards making CI clearer, more sustainable and easier to compare, while continuing to meet consumer needs at an affordable price.
It won't happen overnight but if people are clearer about what their policy covers we should see fewer declined claims.
An increase in understanding should also lead to a better understanding about the need for cover - this can only be good news for consumers, advisers and the industry as a whole.
Some consumers are sceptical about the industry, so the measures to improve clarity and to help ensure that the information we give consumers is relevant, informative and clear should be an important step on the long journey to winning back consumer trust.
