Critical Illness Positives

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After the brilliant life insurance advert (see http://youtu.be/TkyoCHCZlKw ) from Aviva, they have announced there will be a critical illness insurance advert this autumn.

For this, Aviva are to be commended. Unfortunately, too often, any press regarding Critical Illness is negative, usually based around a consumer whose plan has not paid out.

A recent exception to this rule was the celebrity and broadcaster Danny baker who was diagnosed with throat cancer.

http://www.bbc.co.uk/news/uk-england-london-11668994

He told how the financial consequences of the condition were dire. By his own admission, luckily his pal Chris Evans stepped in and provided money, £30,000+, for his immediate needs as he had no Critical illness policy.

Many years ago, I attended a small gathering of financial services professionals. One of the meeting topics was Critical Illness Cover. Unknown to the select group attending there was a guest speaker, the broadcaster James Whale (at that time on a popular radio show with a popular late night TV show too).

He had been diagnosed with a critical illness, and his IFA, who was who we all thought would be speaking, had advised he have Critical illness cover as a general policy, on his main mortgage and on his substantial rental property portfolio. Mr Whale had followed his advice, despite the relatively high monthly premiums. Like the rest of us, Mr Whale thought “It will never happen to me”. But it did. My memory of the event is that he then told how, from the Critical illness Cover payouts, he had enough to pay his medical bills, his mortgage was cleared and he had sufficient cleared income from the now unencumbered rental properties to live. He could choose not to work (because without the payout he would have ‘had to’) and take as long as he needed to recover, with the best possible medical treatment over and above the brilliant basic care he said he received from the NHS. James Whale now has a charity for the specific kidney cancer condition he suffered.

http://www.jameswhalefund.org/

As a financial adviser, I know how complex some of the forms can be that need filling in, how difficult some of the questions are to answer and how frequently clients, with no malice or forethought, ‘forget’ conditions that should be disclosed without prompting or further explaining of the question from me. Many Critical Illness Insurers are trying to improve their application process, something which I applaud.

At the other end is the claims process. Again, too often, a complex, confusing process for people or their families in the middle of dealing with a serious medical condition. Once more, a few companies are leading the way with helplines to assist with the administration and medical issues with the claim.

The Association of British Insurers introduced guidance on insurance claims in 2008 to ensure customers who made a genuine mistake through non-disclosure were not disadvantaged. The guidance emerged after the level of rejected claims hit 16 per cent in 2007. They were dark days indeed for insurers whose reputation suffered and far more importantly consumers and policy holders who had claims rejected.

Pleasingly, since the guidance was introduced, figures from the Financial Ombudsman Service show that the number of long-term protection complaints has reduced by 50 per cent.

At Green Financial we had a Critical illness claim this year that the family initially wished to deal with themselves. But frustration soon set in as the ‘computer says no’ of the insurer took over, staffed by a ‘script reader’ in a call centre. As soon as I was aware of the issues, I obtained copies of the medical evidence from the client myself, re-read the policy terms and conditions to satisfy myself the claim was valid (always worth double checking) and then contacted the claims manager. Things soon progressed and the claim was paid.

The Association of British Insurers has recently revealed the 2010 figures for Critical illness claims:
Insurers paid out a total of £776 million on critical-illness policies.

The total amount paid to customers relating to Critical Illness policies has fallen slightly from 2009, which the ABI attributes to customers cancelling their policies due to budget constraints. I would also wager that less new policies are being taken out as in recent years, the premium cost has risen, as medical science has improved our chances of surviving conditions that once would have been more serious (or ‘critical’)

So what of the regularly erroneously reported statement that 'these policies never pay out’.


11,161 critical illness claims were paid last in 2010, amounting to 89.9 per cent of all claims. 1,248 claims were declined.

Scottish Provident, a leading Critical Illness Insurer has released all their 2010 figures. Here are a few:

60% of all claims were cancer related. The average age for claim was 46


Of these, 40% were men and 60% were women.


Malignant Melanoma was 5% of claims


Heart Attack was the second largest claim group, with 12% of claims. 80%+ were male with an average age just under 50.


A further 4% of claims were for coronary artery by-pass or heart valve replacement (something I am personally likely to claim on one day due to my own congenital heart defect)


Not all companies offer child cover on their policies but Scottish Provident do. 4% of their claims were on the children of the policyholder


Strokes and Multiple Sclerosis accounted for 6% of claims for each condition.

Most Critical Illness providers offer a long list of conditions covered, indeed many compete by declaring how many they cover, but industry wide statistics back up the numbers from Scottish Provident.
Almost 9 out of 10 claims are from the ‘big 4’ of:
-Cancer
-Heart related
-MS
-Stroke


Yes, Critical Illness policies are expensive.


Yes, we all have other things we’d like to or need to spend money on


But consider the cost of having a policy and not needing it, to needing it and not having it.