The Association of British Insurers (ABI) has signalled it intends the end of Total Permanent Disability (TPD).
Its 2009 Statement of Best Practice for Critical Illness Review Consultation Paper proposes to replace the TPD clause in critical illness insurance policies with a set definitions to ensure clarity about what conditions are, and are not, covered.
Commenting Richard Walsh, managing director of SPPR Consulting, said: "Two questions come to mind: Overall what proportion the TPD claims looked at would have been paid using the proposed new definitions? Particularly what proportion would have been paid for back pain and depression (24% and 18% of the claims respectively - the largest categories apart from "other" at23%)
If there is a significant reduction in cover then that would beg a further question as to how the definitions could be amended to provide roughly the same cover."
Linton Penman, head of retail sales& marketing at Unum,was responsible for launching the very first CI product in the UK in the mid 1980s. He said: "I have seen a very simple product become monstrously complicated over the years, to the extent that it has almost lost sight of its original purpose.
"We fully support the ABI's initiative. There are however, two significant potential drawbacks: adding even more definitions to what is in many cases a very long list already, could reinforce the perceived complexity of the product, and increase, rather than reduce, customers' scepticism of the 'small print'. In an attempt to simplify, many advisers may continue to describe the product as one where "all really serious conditions are covered" , in which case the ABI's solution would be in vain.
Swiss re has urged the industry to engage in the debate. Sally-Anne Etienne, Head of UK L&H claims at Swiss Re , said: "The consultation process is critical in creating a debate about these proposals or alternatives to allow the industry to move forward. There are some aspects of the proposal which will benefit from rigorous debate, and we would hope that through the consultation process the industry can come to a consensus on the best way forward."
Penman added: "If what customers really need is a payout for almost any medical condition that prevents them from doing their own job, the ideal solution for most working people, would be income protection. Perhaps, an unintended outcome of the ABI's proposal will be to see a continued revival of IP sales."
