Children's sickness is an emotive issue, but, as Jennifer Gilchrist explains, there are sound reasons for drawing it to clients' attention
Children's critical illness is the fifth highest reason for claiming under a Scottish Provident critical illness policy. While it is a positive message to customers that claims are being paid, when we look behind the detail or think what meeting the actual critical illness definition means, in reality it is heart rending.
Coping with a child's critical illness could be said to be even harder than if the parent had the disease or condition themselves as not only do they have to consider the child and their needs but there will be the normal family considerations to contend with as well and perhaps other children to care for. It is a time when strength and stamina will be severely tested.
Having a critical illness (CI) plan with children's critical illness cover will go some way to providing financial support during what could be a really difficult point in a family's life. It might be the financial lifeline that allows the parents to take time off work to care for their sick child, it could pay for some private treatment not freely provided by the NHS or maybe it could be used to provide a break so the whole family can get away for some rest and recuperation.
Fundamentally, it provides financial support and flexibility for the family just when they need it most so their focus is on their sick child and not on financial considerations.
Increasing illnesses and conditions
Since the late eighties, when children's critical illness began to be covered, like most critical illness products, the number of illnesses and conditions covered has risen and it is now common place for this type of cover to have the same comprehensive list of illnesses as ‘adult' critical illness plans. Obviously, it is recognised that some of the conditions provided like Parkinson's and Alzheimer's disease are more relevant in older age groups.
However, there are also a number of illnesses more likely to occur in younger people including bacterial meningitis and there is a children's version of total permanent disability definition.
There are instances, where both parents have separate cover, that two claims can be made for one child, if there is no cap. Scottish Provident typically make payments of £20,000 for most cases, which is the maximum level of cover provided.
Being the fifth highest critical illness claim payout behind the big three (cancer, heart attack and stroke) and multiple sclerosis, is proof that this feature is not a gimmick and the benefit paid out at claim should not be underestimated. It does play a crucial role in our critical illness protection cover today and is likely to do so for many years to come. Added at no extra cost to the plan holder, the payout does not affect the original sum assured on the parents' plan.
Lack of product development
If children's critical illness cover is so important why has it never been developed? If we look to other markets, for example, in Australia, there are a number of providers with more highly developed children's cover, boasting higher sum assured payments and conversion options so policies can continue into adulthood.
In the UK the cover available in the market is very similar across providers. This may be due to the fact that children's critical illness cover is included at no extra cost and were the cover to be increased beyond current levels, this would result in an increased cost to consumers.
Making a feature out of children's cover could be seen as tricky when it comes to the sales process - would intermediaries feel comfortable fitting their sales pitch around the possibility of a child becoming ill? Although it is an emotive issue, the impact of a sick child's illness should not be overlooked in the sales process and perhaps could be shown as being a reason in itself to buy the critical illness product.
Swiss Re quotes the protection gap to be in excess of £2.4tn. With this in mind it is difficult to imagine that developing a bespoke child cover feature similar to that available in the Australian market would result in a surge in new business. Maybe when protection cover is viewed as a necessity, rather than nice to have, we will see the protection gap contracting and a development of this type of feature taking place. Until then we will work with the children's critical illness cover we have and continue to see it providing really valuable financial support just when it's needed.
Children's critical illness cover is not underwritten; providers do not collect medical evidence for children and the cover therefore comes with a pre-existing condition exclusion. This excludes congenital defects or any condition which is present at birth. The reason for this is obvious but it still causes upset and can result in claims being declined, which is not an easy message to relay to parents.
Relieving the pressure
To allow parents to take time off work without having to worry about paying the bills and meeting their normal financial commitments, some plans provide children's income benefit at no extra cost to plan holders when both income protection and critical illness benefits are selected within the one plan. Added together with children's critical illness cover, this can offer a combined package of a lump sum and continuing income to provide financial stability at a very difficult time.
As we would expect the vast majority of children's critical illness claims we see are for cancer. For example, in 2009 alone, 70% of all Scottish Provident's children's claims were for cancer. Benign brain tumour, traumatic head injury, blindness, stroke and third degree burns also feature but are much fewer in number.
According to Cancer Research, seven out of 10 children with cancer are now successfully treated, but childhood cancer is still devastating for everyone concerned. Treatment can last for months, which means long stays in hospital and being away from home and the financial implications of this on families could potentially be severe.
Over the last four years, we alone have paid out over £4m in children's critical illness claims.
However, since its introduction in 2002, we have paid out very few claims for children's income benefit, which is disappointing - do IFAs and their clients realise how valuable this benefit really is and what they are missing out on? More boys than girls have received claim payments and the average age at claim is around nine or 10 years old. Since 2006, 50 to 60 claims a year have been recorded, apart from 2009 when claim volumes dropped to fewer than 40.
With significant economic turbulence and state benefit provision changes likely, there has never been a more important time to look at protection for the family. As an industry we need to continue to educate on the value and necessity of having protection cover in place. As it is also likely to be the time when many families may decide to review their spending and cut back on insurance, we need to be vigilant that our clients and customers make the right choice which in the majority of cases will not be to cancel their insurance entirely.
Jennifer Gilchrist is senior product development manager at Scottish Provident
