Partial Payments are an added value, but comparison is not plain sailing. Alan Lakey explains.
The concept of partial payments is often associated with the emergence of the PruProtect severity-based plan but in the UK it actually started with Skandia Protect, which in June 2003 added payment of up to £10,000 when undergoing mastectomy due to ductal carcinoma of the breast or on diagnosis of early stage prostate cancer.
PruProtect launched in September 2007 almost three years after the temporary market entrant, Progress from Royal Liver, had included up to £25,000 of mastectomy cover when it came to market in October 2004.
The idea behind partial payments is to add value without making the policy too expensive.
Early stage prostate cancer had been removed from the main cancer definition some years back as new diagnostic techniques were expected to accelerate claims. Insurers were faced with the dilemma of increasing the price or removing the benefit.
Latterly, early stage prostate cancer has re-emerged as a partial payment condition, firstly with Skandia and then AXA and other providers.
The insurers marketing departments now have a new area with which to persuade advisers that their plan is better than their competitors. As with ABI+, there is now a contest developing to see who can claim the most partial payment conditions.
And, as with ABI+ numbers, the figures do not tell the full story. Aviva, LV= and Skandia provide a partial payment for severe visual impairment and while this is commendable it can mislead the unwary.
Friends Life improved its definition for blindness to one that is essentially the same as that used for partial payments.
Therefore Friends Life will look less appealing when counting partial payment conditions but in fact would pay out substantially more using the same 6/60 Snellen Scale claim requirement.
As with the main plan definitions, some partial payment conditions are more important than others.
Surgical removal of an eyeball impacts on around 400 annually although more than 65% are due to cancer, which is already covered. Testicular carcinoma in situ affects around 110 people each year but not all of these undergo orchidectomy, which is a further claim requirement.
This contrasts with the 4,800 who are diagnosed with carcinoma in situ of the breast and the 41,500 early stage prostate cancer diagnoses.
There is a similar story with the new minor heart attack condition from LV=, which pays up to £25,000.
Aviva recently reduced its troponin level requirements, which will enable payment of most minor heart attacks but, as the adjustment is to its main heart attack definition, this improvement will not assist Aviva's climb up the partial payments table.
Friends Life and LV= use a gradated payment design not too dissimilar to PruProtect in that they vary the payout depending on the condition. Early stage prostate cancer pays the lower of £25,000 and 25% whereas carcinoma in situ of the breast provides the lower of £12,500 and 12.5%.
Aviva and Skandia take the simpler route of paying the same amount regardless of the condition, £20,000/20% and £25,000/25% respectively.
The message is, partial payments do add value and, while in general the higher the number the more likely it is to be a better plan, don't be deceived into thinking that the numbers game tells the full story. Like the discredited ABI+ moniker, it can imply more than it means.
Alan Lakey is director of CIExpert Ltd
