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Alan Lakey: Chasing an impossible dream (comment one of two)

Are the ABI’s model wordings a hindrance to plan design?

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Back in 1999 the Association of British Insurers instigated a critical illness working party charged with the task of applying standard generic terms and injecting greater clarity into plans.

Model wordings were applied to 19 conditions in total: seven core conditions (the main areas covered by at least 95 per cent of all plans) and 12 additional conditions (included within 75 per cent of plans).

During December 2014 the ABI issued its sixth statement of best practice, which refreshed a number of condition wordings. The revised model wordings reference 22 conditions as well as terminal illness and total and permanent disability. 

Times have moved on. When the original statement of best practice came out market leaders such as Scottish Provident covered 25 conditions, whereas today, including additional conditions, standard critical illness plans now offer a choice of 72 specific ones as well as cover for terminal illness, loss of independent existence, total and permanent disability and children’s cover.

While the ABI’s efforts are laudable, there are a number of questions deserving of an answer. For example:

  • Are the current minimum standards desirable?
  • Is there any point mandating wordings for 22 conditions when by the end of this year over 80 conditions will be in use?
  • Does the use of the disingenuous term “ABI+” actually hinder understanding among advisers?

While minimum standards can be considered good for consumers they tend to inhibit innovation and, as insurers seek to find new methods of distinguishing themselves by going beyond the minimum, this creates confusion by reintroducing a variety of claims wordings.

As is often seen with any form of central planning, the good intentions are frequently outweighed by the unintended consequences. Back in 2007 the impact of the revised model wordings was to diminish the claim potential of numerous conditions. It was argued that the changes were necessary to future-proof the product but this argument has been weakened by a subsequent drift back to pre-2007 wordings.

With model wordings being used for less than 30 per cent of the available critical conditions, are we in danger of wasting energy and resource by chasing down an impossible dream? 

There has been an upsurge in additional payment conditions (formerly known as partial payments) starting by Skandia Life in 2003 and not one of these conditions has been blessed with a model wording.

The question is: are model wordings a benefit or a hindrance to plan design and a better understanding for advisers and consumers?

Alan Lakey is director of CIExpert 

 

Condition ABI Model Wording? Number of Variations in use

Accidental Hospitalisation

5

Alzheimer’s Disease

Yes

Aorta Graft

Yes

7

Aplastic Anaemia

5

Bacterial Meningitis

5

Benign Brain Tumour

Yes

5

Benign Spinal Cord Tumour

3

Bladder Removal

1

Blindness

Yes

9

Cancer

Yes

12

Carcinoma in situ of the Cervix

4

Carcinoma in situ of Oesophagus

2

Carcinoma in situ of Breast

11

Carcinoma in situ of Urinary Bladder

3

Cardiac Arrest

6

Cardiomyopathy

8

Carotid Artery Stenosis

2

Central Retinal Artery Occlusion

2

Cerebral Aneurysm

7

Cerebral Arteriovenous Malformation

6

Chronic Lung Disease

6

Chronic Rheumatoid Arthritis

2

Coma

Yes

11

Coronary Angioplasty

4

Coronary By-Pass Grafts

Yes

7

Creutzfeldt Jakob Disease

5

Critical Fracture Cover

1

Crohn’s Disease (one resection)

3

Deafness

Yes

5

Dementia

2

Devic’s Disease

1

Diabetes Type  1

4

Early Stage Prostate Cancer

8

Encephalitis

2

Heart Attack

Yes

8

Heart Valve Repair/Replacement

Yes

6

HIV

Yes

3

Intensive Care (Mech Ventilation)

5

Kennedy’s Disease

Kidney Failure

Yes

2

Liver Failure

3

Lobectomy

1

Loss of Hands or Feet

Yes

6

Loss of Independent Existence

9

Loss of Speech

Yes

4

Major Organ Transplant

Yes

4

Motor Neurone Disease

Yes

4

Multiple Sclerosis

Yes

9

Multiple System Atrophy

2

Non-severe Cardiomyopathy

1

Non-malignant Pituitary Adenoma

4

Open Heart Surgery

2

Ovarian Tumour of Borderline Malignancy

3

Paralysis of Limbs

Yes

6

Parkinson’s Disease

Yes

11

Parkinson Plus Syndromes

2

Partial Loss of Hearing

1

Peripheral Vascular Disease

1

Pneumonectomy

2

Primary Pulmonary Hypertension

3

Progressive Supranuclear Palsy

7

Pulmonary Artery Replacement

2

Removal of an Eyeball

3

Severe Crohn’s Disease (two resections)

5

Severe Visual Impairment

6

Spinal Stroke

1

Stroke

Yes

7

Systemic Lupus

7

Testicular Carcinoma in situ

7

Third Degree Burns over 20% of body

Yes

8

Third Degree Burns below 20% of body

4

Traumatic Brain Injury

Yes

4

Ulcerative Colitis

4

 

 

 

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