The Association of British Insurers has received the go-ahead from the Office of Fair Trading to clarify its definition of total permanent disability.
The ABI has been keen to ensure that the definition is more widely understood because more claims for TPD are declined than for any other single critical-illness condition, but required OFT approval to act.
The insurers’ body believes that TPD claims are being declined because the condition has only one “fluffy” definition but many underlying causes. It suggests having a separate definition for the five most common causes of TPD would make it clearer and result in fewer claims being turned down.
Head of protection Nick Kirwan says the ABI plans to analyse around 1,000 claims to determine what the most common causes of TPD are. He says it will then produce separate definitions for these and backtest the cases using the new definitions.
He says: “We have only one definition for TPD which has to suit all the different causes. It is fluffy and confusing. We believe that fewer claims would be declined if the definition was split into its underlying causes. We are very determined to crack this issue.”
Kirwan says the ABI has taken measures to sort out non-disclosure, which he claims is the biggest issue facing the industry, and introduced standard definitions for critical-illness cover and TPD on the agenda.
CBK adviser Peter Wright says: “TPD has become a moving target. More clarification on what the condition actually is would help advisers and be much clearer for clients.”