Adrian Garside

The ABI (Association of British Insurers) sets the manadatory definitions for Critiical Illness policies.

So, a Critical Illness policy will have 27 illnesses, all of which have a certian definition. Technically, that enables an IFA to advise on Critical Illness Insurance on a level playing field.

The problem for the insurance companies, is that if all illness definitions are the same, how do they fight for your business, other than on price.

Well, one way is for them to have a few extra illnesses – most insurers have more than just the 27 illnesses, most have over 30 and BUPA has the most at 39 (ignoring the Pru who have 100 and I’ll talk them about in a minute).

From there, I can run a list of critical illness policies, and then look for the best policy amongst the cheapest.

Another way, is to provide extra benefits – Bright Grey and AXA both have couselling services, advice services and BG even have MacMillan nurses available for cancer sufferers. So, if BG or AXA are amongst the cheapest, I’d recommend them over the cheapest ‘bog standard’ policy.

And, the latest way is the ‘ABI+’ definition. Bright Grey have just made another 3 (total of their 35 claimable illnesses ABI+ – meaning that the definition they use is easier to claim on than the ABI definition. So they say:

• Benign brain tumour – the requirement for permanent neurological deficit with persisting clinical symptoms will be waived if the benign brain tumour is surgically removed.
• Coronary artery bypass grafts – we’ve removed the requirement to use surgery to divide the breastbone.
• Heart valve replacement – we’ve removed the requirement to use surgery to divide the breastbone.

This isn’t just plain generousity, or market forces – take the last one, they hardly ever divide the breastbone these days, so removing this criteria makes sense.

So, now as an IFA, I keep an eye on the ABI+ lists…

Oh – I was going to mention the Pru – their serious illness list includes the ABI critical illness definitions, but also has 73 further illness that are claimable. In addition, many have ‘proportional payments’ so, for instance ‘total and complete blindness’ is the critical illness definition, but Pru would pay out half a claim for 1 eye being blind, or 10% claim for Tunnel Vision.

This policy is so far and away better, in my opinion, than regular critical illness insurance that I always discuss it with clients.

Mostly, when insurance companies tweak their definitions of illnesses, the differences are more technical than genuinely useful.

This is different.

Breast Cancer has by far the highest number of claims in the world of critical illness policies – the definition is usually along the lines of having malignant cells – here is a typical definition I’ve just cut from a brochure – “Any malignant tumour positively diagnosed with histological confirmation and characterised by the uncontrolled growth of malignant cells and invasion of tissue.”

That’s quite a high qualification level, and is pretty standard across all companies.

The news that has caused a ripple in my pond is this: Prudential have just added even more illnesses to their list that qualify for a payout and they have included Lumpectomy in their ‘proportional payout’ range.

So, any woman having a lumpectomy qualifies for a 10% payout on their critical illness cover.

Anybody thinking about buying a critical illness policy needs to look beyond the premium and give thought to the quality of cover they wish to take – for some clients the Pru are very cheap, but they are not always cheapest. It is very easy to see a league table of premiums and think all policies are the same so take the cheapest.

For me, the Prudential are very different, so for clients we need to consider the cheapest policy, but we also need to consider the premium with the Prudential and also the premium with Bright Grey who have some unique features to their policy as well.

I’ve been reading the figures published by Scottish Provident on their 2009 critical illness claims.

In order, here are the most common claims.

1. Cancer                                -  765 claims paid, average age of claim 46
2. Heart Attack                    -  144 claims paid, average age of claim 48
3. Stroke                                 -  74 claims paid, average age of claim 48
4. MS                                        -  66 claims paid, average age of claim 39
5. Childrens Critical Illness – 37 claims paid, average age of claim – 9

Now that list goes on for some time.

The top two illnesses are no real surprise. Number 5 is the one that will raise eyebrows.

Childrens Critical Illness cover is regarded as a ‘fringe benefit’ – probably becuase most policies offer it as a free inclusion.

However, where there are children, or I guess, there could be children, this needs to be at the front of an advisers mind – most policies provide cover for £15000 – £25000 per child, but recently I have recommended a policy where you can set the amount of cover for each child. In the example, we chose £44000 and it cost an extra £2 or £3 pm.

Earlier today, someone found my blog by searching for ‘divorce critical illness payout’.

This is an awkward topic, as an adviser, it’s tricky to raise this as a subject with a married couple, but it is something that affects my advice. And later, in the event of divorce, it is even more awkward.

With most insurances people decide which one wants to keep the policy (if either do) and the other signs away their interest in the policy – with life insurance this is quite common and endowments as well, usually there is an exchange of cash as well when it’s endowments. Pensions as well, in divorce can be split according to the agreement made by both parties.

With most joint critical illness policies it gets complicated. A joint policy will usually pay out once only – on the 1st event of either Mr or Mrs Smith becoming critically ill and then the policy stops. They usually pay out on death too…and then the policy stops.

So, we have considerations:

Firstly we have ‘old definitions’ – old policies have illnesses that used to be critical, but as medical knowledge has progressed those illness have become run of the mill and not critical, or if it’s not the illness itself, the definition is ‘claimable’ at what is now a non critical stage. Essentially, old policies are better than new.

Secondly we have the money issue – someone has to pay the premium, and they will expect the pay out. This is not a problem in the event of death of the other party, that will still be a payout and I don’t suppose anyone will contest it. And it’s not a problem if the payer becomes ill, they’ll just take the payout. But what if the other person becomes critically ill – proving they are ill will require their co-operation.

There is a partial solution – some companies will split a policy in the event of a divorce – although some require medical evidence to be provided and so may decline one party or the other and some also required a new mortgage to be taken out. If it’s happening to you, this is worth investigating.

If this isn’t an option, then I suggest you make your agreement at the time of the divorce – negotiating cash payouts on a partners critical illness is never going to look ‘seemly’.

For me, I usually recommend 2 single life policies, I explain this is because there is potential for 2 payouts. This is another ‘background’ reason though.

The ‘Man from the Pru’ no longer visits customers, he visits IFA’s and he’s just been to see me. Not today, you understand, it’s 7am as I type this – I saw him last week.

They have added ‘healthcare’ to the options on their ‘all in one’ insurance policy. My interest was mild, Healthcare is a pretty complex subject and there are many policies to choose from specialist providers and I wasn’t inclined to think he’d tell me anything that wouldn’t be revealed by running a search on my software.

But he surprised me.

They have the usual options – range of hospitals, range of cover etc and when I am looking at these options, I would put the Pru into competition with the usual providers and they would have to stand on their own two feet.

But they have an addition option that did tweak my interest.

It’s Private Health Insurance that just covers Cancer and Heart attacks. Now, the NHS are very good at Cancer and Heart attacks, from what I gather, but, good as they are, they have budgetry restraints – for instance Herseptin isn’t on the NHS, but is provided on this policy if appropriate – and the hospital experience is better when private, just by the very nature of things.

And this cover can be cheap – I was just running off quotes for a couple (him 40′s, her 30′s)  who wanted Life and Critical Illness Insurance. I added this Cancer and heart attack cover and the additional cost was £28. The cover is cheaper when run side by side with serious illness cover than if it’s stand alone because they cross subsidise the cover.

It seems to me that if you are interesting in Private Health cover, but have always found the premiums daunting, this is an ‘entry level’ product that is worth considering. Talk to your friendly neighbourhood IFA.

photo credit: @thewtbOh yes…it says so in The Mirror. If it says so in the The Mirror, it must be right.

But hang on, it says so in The Telegraph too…it’s even better in the Telegraph – they say “that scientists have found men suffer from flu more because they “invest in their spirit of adventure at the expense of their immune system”.

That’s me all over!

What is going on is that some boffins at Cambridge University set up a mathematical model that looked at the probability of ‘Man Flu’ existing and they say that “if males are more exposed to infection than females, perhaps through riskier behaviours, it is possible that they evolve less effective immune systems”. They say that this result is at “odds with intuitive expectations”.

So, mathematically, there is a chance that man flu exists, but it’s not yet scientifically proven.

Well, as my fans will know, I like maths. I think this research is bang on!

For those who want the less biased details – here’s the link to the NHS website – http://www.nhs.uk/news/2010/03March/Pages/Man-flu-myth-or-real.aspx

There’s a question on one of the trade websites – I think it was ‘Mortgage Introducer’ asking if IFA’s provide a better service than standard mortgage brokers.

Well, I was a mortgage broker, and now I’m an IFA.

Service – hasn’t changed – I still do my best – I offer the same advice, albeit with a better range of products – I still take it personally when a lender messes up, I’m even worse if I do!

Product range – I think this is the difference, and it’s not all to do with the mortgages. I’m a member of alot of mortgage clubs so have a decent range of exclusive deals available to me – some brokers may not have access to so many. Also, some brokers only have access to some products in theory – I know one company that tells their brokers that they can use any lender they like. But they have an approved panel and the broker gets no commission for going off panel. Guess how many times they need to go off panel.

But, for all the related insurances it makes a huge difference. For instance, the other day I quoted Buildings and Contents Insurance for somebody. There was going to be a charge if they used a product away from the lender, so we needed the premium from the lender first – £59pm. I could get it for £43pm elsewhere.

£16pm saving.

And you can see similar savings on all types of insurance between a cheap provider and an expensive one. And, I don’t recommend policies where the cover is compromised. Quite the reverse.

I’ve just been given a sheet of statistics for critical illness claims of different insurance companies.

It makes for interesting reading, and may be quite useful for when it comes to selecting a company to provide Critical Illness cover for my clients.

So, the big thing about this style of cover is that people perceive that insurance companies wiggle on their claims and actually, the evidence is that this is either a ‘old problem’ or it was never a problem, but occasionally there is a big fuss when it happens, making it seem like a big problem.

Anyway, the 2009 figures show stats for 11 providers.

They show that the 11 paid out on between 88 and 93.6 of claims and that sounds pretty good. However, it does mean that between 6.4 and 12% of claims are rejected and that doesn’t seem so good. When you look at the ‘rejected’ figures, you’d probably want to be at the better end of the table.

There are 2 reasons for a company not paying out on a claim. The 1st is ‘non disclosure’ – where the insurance company didn’t have all the information up front. A good example is smokers saying they don’t smoke, but sometimes illnesses are ‘forgotten about’ too.

The other reason is that the critical illness in question wasn’t on the list of things covered, or maybe they were, but you weren’t ‘bad’ enough. Amputation of a limb is pretty clear cut, but the amputation has to be above the wrist or ankle – if it isn’t, and you claim, it will be rejected. The same with ‘total and permanent blindness’. If you become blind in one eye, if you claim, it will be rejected.

So, rejected claims aren’t necessarily a sinister thing, most people would take the attitude that ‘there’s no harm in trying’.

Non disclosure is probably not a problem these days either. Advisers, or certainly this adviser, is paranoid about non disclosure and makes his clients disclose every cough and sneeze.

My thought is that you’d expect all companies to have roughly the same experiences in both areas and they don’t. On the other hand, a ‘poorer’ company may have changed it’s processes or application form or definitions recently and have solved the problem.

I suspect, I’ll end up running league tables for my clients and if two companies have the similar premiums, and similar lists of critical illnesses, it could be one of the factors I could use to choose between the two.

I almost always recommend income protection insurance over critical illness insurance.

This is because Critical Illness insurances have a set list of illnesses, whereas Income Protection pays out on any illness that stops you working.

Now, there is a point that if money were no object you’d have both. But, since it is an object, what we have here is what causes the least financial danger.

If you have an illness that stops you working, but isn’t critical – stress for instance – then money will be a problem and income protection solves that.

If you have a critical illness that doesn’t stop you working, then you’ll wish you had critical illness cover – but it won’t be because you are in financial dire straits, it will be becuase everyone wants a huge chunk of money.

LV= have just issued their claims stats for this year – they do both types of insurance and as with other providers they show that Cancer is the biggest payout by far on Critical Illness policies.

For income protection the top four causes of  claims over the last 12 months were mental disorders (29%), musculoskeletal disorders (20%), circulatory system disorders (11%) and cancers (11%).

The 1st 2 are not covered on critical illness policies, the 3rd is a grey area.

The average age of a female income protection claimant was 44 years, with male claimants two years older on average at 46 years. This is older than the critical illness claims stats issued at the beginning of March by Bright Grey, which had males at 42 – that’s interesting.

For income protection, the average payout period was 8 years. And this is why I recommend it – if you need protection, this is the one that can be the most help.

Full story – http://www.dailymail.co.uk/news/article-1254881/Cigarettes-killed-Message-smoker-funeral-hearse.html

Albert Whittamore died from smoking, and now must be applauded for trying to get the message across and also answering the question that everyone asks when they see a hearse “I wonder what happened”

This trend could continue, and then you can imagine ‘one upmanship’ entering the equation – I will be amending my will to include instructions for “died spying for country while jumping across rooftops” to be on the sign in my hearse – I’m not taking my final journey with everyone knowing that I died playing a quick game of patience.

This fits with my oldest sons birth certificate, where I convinced the lady at the registry office that I was a ‘special agent’. Should keep geneologists guessing in years to come.

I am also now amending my divorce story from ‘we gradually drifted apart’ to “she caught me in bed with two women”…