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Critical faculty

After almost four years of hard graft, frustration and grief my critical-illness knowledge base, CIExpert, is finally up and running.

The concept was established in 2008 when it became apparent to me that despite being able to compare the differences between competing claim definitions, I was unable to allocate a true value because the actual condition incidence figures were unknown.

By this I do not mean the headline figures such as, 260,000 new diagnoses a year. This only tells us that it is a major health concern, it does not provide any real guidance to potential CI claims.

Incidence statistics inform us of the numbers of diagnoses and curative techniques for any given year and this is the type of information that providers and reinsurers use to price their products. Naturally, advisers should also be aware of this information but it is devilishly hard work to unearth it and then contextualise it for CI purposes.

Additionally, there are trends developing which hint at deviations to future claims experiences. Malignant melanoma, prostate and liver cancers are all increasing whereas stomach, lung and bladder cancers have shown a marked decrease.

Some have commented on CI plans being easy to value, that because 85 per cent of claims come from five conditions then the product is commoditised.

This is palpably untrue because even with the five prime conditions – cancer, heart attack, stroke, multiple sclerosis and benign brain tumour – there are significant variations.

A prime example is loss of limbs. Some providers insist on loss of two limbs whereas others on only one limb. Statistically, there is a 14 times greater prospect of losing one limb than two. An important consideration for what is, admittedly, a relatively minor condition.

CIExpert provides information for consumers as well as a wealth of information for advisers. This includes rating competing plans for different age groups, gender and smoker status as well as providing access to a library of historic plans going as far back as 1991.

Additionally, there is a detailed analysis of every condition with the ability to print off a report showing how a plan selection has been arrived at.

Strangely, there has been no real focus on the differences between current and historic CI plans but, believe me, most of the pre-2002 policies offer more scope for a successful claim than the current versions, particularly for men.

Back in April 2009, FSA research concluded that 68 per cent of policy owners believed their plan paid out if they were unable to work. These figures, even if slightly inaccurate, demonstrate the complexity of these plans to Joe Public, a description that may extend to some advisers, particularly those about to put their toes in the protection water after the RDR.

As an industry, we need to increase the size of the cake instead of endlessly resegmenting it. Such a task may well be the only positive benefit that stems from the RDR depredations and we all need to make the most of the opportunity to simultaneously reduce the protection gap and offer the correct advice.

Alan Lakey is partner at Highclere Financial Services

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