A change of heart

The recent proposal to change the wording of the definition of a heart attack for critical illness (CI) policies has raised questions as to what it means for existing and future CI policyholders and ultimately the effect it may have on the cost of cover.

The first question we need to ask is why we need a change in definition. Concern has arisen because doctors are using a form of testing, called the troponin test, to diagnose heart attacks. Troponins are chemicals released into the blood when heart muscle is damaged. The advantage to hospitals of troponin tests is they are quick, cheap and effective. The problem is that the CI definition does not include it as evidence. There is, therefore, a gap ' hospitals are presenting evidence not officially recognised by insurance companies. The ABI Critical Illness Working Party argues that the CI definition needs to be based on the medical evidence likely to be presented by hospitals.

A confusing issue

No one is admitting to having rejected a heart attack claimant because they only had evidence of troponin. This is not actually the issue. Neither is anyone suggesting there are people skipping around following an angina attack with a lump sum in their pocket because they were able to claim for a heart attack. This isn't the issue either.

Another possible issue ' not surprisingly ' could be an increase in claims. If insurance companies do not cover themselves adequately, could this mean higher premiums? Apparently this is not the real issue either. If you're feeling confused about what the proposed change in definition will mean, you are not alone. 'I think it was very clear beforehand,' says IFA Steven Gordon, partner at HCF Partnership. 'I do a lot of critical illness, and I'm very aware of the definitions, and I think it's incumbent on advisers when you say to a client 'you are covered for cancer', it's invasive cancer not cancer in situ because people think they are covered if they get any cancer.

'Similarly, for a heart attack there are clear definitions, such as raised cardiac enzymes and changes on an ECG machine. I think we have to move ahead with science, but we have to be clear so we can be comfortable with what we are recommending.'

The proposed new wording for the definition of heart attack is as follows:

'The death of a portion of heart muscle, due to inadequate blood supply, that has resulted in each of the following:

• Typical chest pain.

• New electrocardiographic changes or relevant findings on a heart scan.

• The characteristic rise of cardiac enzymes or troponins.

The evidence must be consistent with acute myocardial infarction. The old definition for comparison reads:

'The death of a portion of the heart muscle as a result of inadequate blood supply as evidenced by an episode of typical chest pain, new electrocardiograph changes and by the elevation of cardiac enzymes. The evidence must be consistent with the diagnosis of heart attack'.

'To explain the difference between the old and new proposals we need to recognise troponin tests are on the increase,' says Nick Kirwan, head of product development and marketing at Scottish Provident and chairman of the ABI Critical Illness Working Party.

He adds: 'That means the evidence that the hospital has available is different from the evidence the current definition is asking for ' it is that gap which the new definition aims to close.

'If insurers were to interpret the old definition strictly they would say 'we will accept you have had a heart attack if you show us you've had chest pains, elevated cardiac enzymes and ECG changes.' If the patient says 'I do not have cardiac enzyme evidence instead I have troponin' that is not a tenable position. What we are effectively doing, if we do nothing with the wording, is to ask people to trust us when the time comes ' and that is not satisfactory,' says Kirwan. 'It is right we give people clarity at the point of claim.'

So, should new policyholders be concerned about the change in definition if it is accepted? The insurers say no.

Consumer confidence

'Customers can be confident that the products they are buying today do exactly what they say on the tin. If you suffer a heart attack, it will pay out,' says Ronnie Martin, protection director at Legal & General.

But what of the concern that we may be looking at an increase in claims under the new definition? This too is thought to be unlikely, because insurers will need to look for all the other signs of heart attack as well as troponin.

'What this definition won't do is change the number of people who have a heart attack,' says Kirwan. 'It is about clarifying exactly what evidence insurers will accept. Heart attack diagnosis is not easy. There is a continuum of indicators, so at the margin there is a grey area as to whether an event was a heart attack or not.'

Troponin, for example, could also indicate angina. No one is disputing the seriousness of angina, but angina is not the same as a heart attack and CI cover is there to pay out for a critical event. Troponin may usefully indicate propensity for heart attack, which means measures can be taken to address the problem ahead of a critical event, but claimants should not expect a payout under the heart attack definition.

Why insurers are concerned is because heart attacks comprise a huge proportion of claims experience, especially for men. This makes it a major component in the pricing of the CI product which explains why it is being given closer attention than, say, the definition for loss of limb, which may only comprise one in 20,000 claims.

An educated guess

This is not to say actuaries will be automatically upping their predictions on the likelihood of heart attacks or even heart disease.

'The most difficult part of any costing is the unknown quantity of which there is always going to be an element,' says Rosalind Pearson, research and planning manager, personal finance at Swiss Life, 'It's an educated guess most times with claims ' isn't that the basis of actuarial science?'

Kirwan highlights two reasons why there should not be a significant impact on premiums. First, although technically the new definition is slightly wider because it will accept additional forms of evidence, it assumes insurers have interpreted the old definition literally, which Kirwan does not believe has been the case. Second, heart attacks in the UK are declining, as we are becoming a fitter and healthier nation.

'It's true actuaries do factor into their pricing the fact that heart disease is on the decline, but nonetheless it creates a favourable environment for widening the scope of cover,' says Kirwan.

Ronnie Martin agrees: 'It is too early to say whether the assumptions made would worsen because of the revised definitions, but the intention is to make clear the circumstances which can show that someone has actually suffered a heart attack. The intention is not to put us in a situation where we avoid paying out where someone has quite clearly suffered a heart attack. That is definitely not the case.'

No insurer is going to put their head on the block and say premiums will go up or not. But that is part of the reason why the proposed wording is in the public domain for consultation. And there may be some pleasant surprises on the cost front.

Pearson says: 'The nub of the argument is nobody knows how this will impact and it's all a bit up in the air. We recognise medical science has moved and we need to look at the fundamentals of the definition for critical illness. But it is such a competitive product ' whether insurers will want to put their rates up is another matter. How each of the providers is going to respond is unknown at the moment.'

'If we highlight issues that lead to more claims and higher premiums, we have to be careful we don't price people out of the market,' says Gordon. 'The upside is the players in this market are all jockeying for position which is the driver keeping the premiums down.'

This leads to a potentially unfortunate, but not new, aspect of definition wording that can be used by insurers for competitive edge.

'It's important we keep the product simple, understandable and affordable ' that underpins everything we do,' says Martin. 'We need to be careful we don't damage the benefits of having an agreed definition by trying to move away from it to gain competitive advantage. That has happened on existing core definitions with some providers saying they can do better than the minimum. He adds: 'We should leave competition in the marketplace for other areas such as benefits, options and number of illnesses covered.'

You may not be any clearer as to what the proposed new wording for the definition of heart attack may mean in the long term as even the insurers themselves do not know. What we can be clear about is the nature of the CI beast is changing.

'It's a case of wait and see,' says Pearson, 'Critical illness is developing and the challenge is managing people's expectations. We've had 10 years of the product in the market and not a lot has changed in that time. It's only now in this century ' first with prostate cancer and now with changes to heart attack ' that we are going to see more evolution of the product.'