For years, the prime marketing focus for many criticalillness insurance providers has been the numbers of conditions they covered.
Company X would gleefully point out that it covered two more conditions than rival Y. This provided an easy and simple distinguishing mechanism, albeit one that offered little relevance when comparing the characteristics of the different plans.
The latest and hippest differentiator to emerge is the ABI+ race, where providers promote their plans by reference to how many of their definitions exceed the ABI model wordings.
Is this comparison germane or does it merely assist the slothful adviser who thereby avoids the aggravation of product analysis? Certainly, it assists the adviser who seeks to emphasise superiority to an oblivious client but does it provide a worthwhile form of comparison?
We need to start by understanding what an ABI model wording is. Every three years, the ABI reconsiders criticalillness definitions and confirms a model wording for those conditions included by 75 per cent of providers. The model wordings were originally aimed at reducing the confusion caused by the multitude of dubious and downright strange definitions then in use. They were also intended to deliver the simplicity of commonality while still allowing individual insurers to go beyond the model wording if they desired.
It was never intended that this would enable product comparisons. One weakness is that not every condition has been accorded a model wording. Aplastic anaemia, cardiomyopathy, chronic rheumatoid arthritis, emphysema and open-heart surgery are just a few of the conditions that are not currently included. Arguably, until every definition has a model wording, the use of ABI+ as a measuring tool is rendered pointless.
A second weakness relates to what exactly constitutes the term ABI+. If a provider includes limited cover for early stage prostate cancer, or for
mastectomy due to noninvas – ive breast cancer, does it entitle them to claim ABI+ for cancer? If so, then how do you measure an insurer which includes both early stage prostate cancer and mastectomy?
The third weakness is that not every claim of an ABI+ def – inition necessarily constit utes a worthwhile improvement. Currently, eight insurers claim ABI+ for their heart attack definition because they do not insist on “typical clinical symptoms”, which generally means chest or arm pain. The providers that do use the ABI wording assure that they would not determine a claim any differently from the ABI+ brigade.
Contrast this with the significant differences within the loss of limb(s) category. Four insurers will meet a claim for severance of one limb. This presents a markedly different claim potential because statistics indicate that loss of one limb is 19 times more probable than the loss of two.
Additionally, ABI model wordings frequently enable individual insurers to apply age limits, for example for Alzheimer’s disease, motor neurone disease and Parkin – son’s disease. This means a provider which does not apply an age restriction is offering a more claim-friendly definition than one that does. However each company’s phraseology falls within the ABI model wording. This further erodes the logic of assessing merit using the ABI+ as a guideline.
If we use the ABI wordings as minimums, all is well but once we start considering ABI+ as anything other than a marketing term we are promoting confusion for consumers and advisers. Alan Lakey is partner at Highclere Financial Services.
Alan Lakey is a partner at Highclere Financial Services