The ABI reviews the statement of best practice on critical illness every three years. Given the high frictional costs associated with the change that the customer ultimately pays for, is it still correct that we should follow this strict path?
Nick Kirwan, ABI
Our Statement of Best Practice (SoBP) was developed to ensure consumers can take out a Critical Illness (CI) policy with confidence. It sets out clearly a standard set of definitions that consumers can expect all CI policies to follow as a minimum.
CI insurance makes a huge difference to the lives of policyholders at very stressful times, so it is essential consumers always have confidence it is fit for purpose. With constant medical advancements and the industry striving to improve customer experiences, regular reviews of the SoBP are vital.
Changes to the way a policy is worded, underwritten or sold could have associated costs for companies, but these will be nominal. Any changes to the SoBP are made in the best interests of consumers, after careful consideration and consultation. We also allow a reasonable timescale for any changes to be made, allowing firms to build them into the normal cycle of product maintenance. The ABI and its members have a duty to ensure that any problems consumers may be having with a product are addressed – these reviews provide opportunities for this.
Recent changes to how non-disclosure of medical information discovered at the point of claim is dealt with, have been a huge success, enhancing the reputation of CI in both consumers’ and regulators’ eyes. With issues of consumer detriment, doing nothing is never an option for the ABI. Correcting or evolving products are not easy or popular tasks, but they sometimes need to be done. The consumer is at the heart of everything the ABI does, which is why these reviews will remain a crucial part of our work.
Kevin Carr, PruProtect
The statement was first drafted in 1999 following an Office of Fair Trading (OFT) report on health insurance. It introduced model definitions and wordings and allowed for a review every three years, with interim reviews if needed.
The reviews are an opportunity to ensure that it continues to achieve its key aims of helping consumers in three areas, namely security, comparability and clarity. These can be important for all parties as they represent an opportunity to improve outcomes that ultimately benefit consumers. They exist so the industry can respond to ongoing changes and improvements in the external environment and ensure, as best as possible, that these changes are reflected in both the definitions used and the competitiveness of the premium.
I am not convinced there are any significant consumer costs associated with the reviews, nor does the work carried out always automatically result in wholesale changes. If medical definitions become outdated costs could rise and it could be argued that without these reviews the cost of critical illness could have increased by more than it has.
The aim is to ensure appropriate minimum standards of cover and to help consumers understand and compare products by defining commonly used terms and providing model wordings for certain critical illnesses and exclusions. It also provides guidance on how the cover should be described and explained to customers.
It is likely that ongoing reviews will always be required as long as medical science continues to evolve.
Peter Le Beau, Le Beau Visage
If the FA had to rewrite the laws of football every three years I suspect that widespread questions would be asked about the viability of the ‘Beautiful Game’.
The present overhaul of critical illness that is taking place underlines the problem that the product has but this also illustrates that the product clearly has enough industry admirers to warrant a wide-ranging facelift.
Personally I have always felt that critical illness, while a remarkable sales success, was a product introduced by some re-assurers in the Eighties (and do not blame me because I was not one) who should perhaps have realised that trying to transplant a product from South Africa directly into the UK market was ultimately liable to lead to problems.
Products should emerge as solutions to client need rather than as opportunities to illustrate global reach.
Medical science is now developing so fast that future-proofing CI is becoming a task akin to repainting the Forth Bridge.
Whether the Statement of Best Practice should be revised every three years is a perfectly reasonable question to ask but a better one is whether we now need to rethink what critical illness is all about.
It is a solution to providing lump sums when people suffer serious illness but is it the best one? Personally I think there needs to be more enlightened industry thinking about this.
Ed Stuart-Brown, Friends Provident
One of the key aims of the ABI statement of best practice is to help customers make easy comparisons between providers. There is also an ongoing need to keep illness definitions up to date with medical advances and improvements in treatment.
The more that illness definitions look the same, the easier it is for advisers and customers to compare products. While adding more illnesses to the list helps clarify what is and is not covered, a race among providers to offer the most illnesses, some of which may add very little to the overall proposition, could be counterproductive. Are consumers and advisers really going to want to compare what could ultimately be a hundred or more illnesses, especially if premiums increase?
As medical advances happen, insurers must be able to update the illness definitions, as conditions that were previously viewed as critical could become more treatable or even cured. This can lead to minor changes in definitions, such as exclusion of specific cancers, or to more dramatic changes as happened not so long ago when a change in the treatment of angioplasty led to far quicker treatment and higher chances of recovery.
The current statement of best practice review includes some fairly radical proposals, such as the removal of TPD from critical illness policies, and has led to some debate that should be welcomed.
There can be no doubt that regular reviews should continue in the interests of both the customer and the insurer. What must be avoided is a reduction in cover and an increase in premiums.
