Last year saw turmoil in the critical-illness market. The long-term future of guaranteed rates came under pressure as reassurers pulled out of the market and those supporting guaranteed rates pushed their prices ever higher. Some insurance companies were raising their prices on a monthly basis – some changing rates twice in one month.
IFAs feared that one of the most successful products of the last decade would be removed from the market or priced out of a client's budget, with nothing to replace it.
In early 2004, the worst of the storm seems to have passed. There are still insurance companies and reassurers willing to offer guaranteed critical-illness products and recent price movements have made it more rather than less affordable. Nevertheless, we must not assume that there will be no more changes to the product this year or in the future.
For guaranteed rates to exist and remain affordable, we must continue to refine the product to ensure we do not pay out on “windfall” illnesses. The definition of the conditions covered remains critical. “Windfall” illnesses can be defined as illnesses that do not impact on the customer's quality of life.
In January, term and age limits were reduced and the number of illnesses covered decreased with the removal of angioplasty.
Why was angioplasty removed? With advances in treatment, particularly the use of keyhole techniques, angioplasty is not foreseen to be a critical illness in the future. Already, improvements in diagnostic and treatment techniques are leading to a much shorter recovery time. Health Secretary John Reid recently announced £1m worth of funding to examine the feasibility of providing a national angioplasty service within 24 hours of hospital arrival.
Removing this potential future “windfall” illness from critical-illness cover helps maintain affordable guaranteed premiums today and reduces the need to increase reviewable premiums in future.
In 2002, the ABI produced new definitions for heart attack and cancer. The definitions used to define other critical illnesses are under review. We can expect more changes to ensure that diagnostic techniques are relevant and the conditions covered are critical and life changing.
Dr Roger Boyle, the Government's “heart tsar”, predicts that premature death from heart disease in England could be unheard of within a decade because of earlier detection of future problems and improved treatments.
Patients can expect better drugs when admitted, such as thrombolysis drugs to improve recovery, drugs to prevent heart attacks and statin drugs to lower cholesterol. Therefore, the definition of heart attack will have to be reviewed so that payments are restricted to claims which genuinely impact on the customer's quality of life.
Five-year survival rates for cancer continue to improve even though the number of instances is still rising. The Office of National Statistics says male survival rates in the 1990s increased in over 90 per cent of cancers while for women the figure was over 75 per cent.
Earlier detection of cancer is the key to survival and a good example is the recovery rate from breast cancer. Since screening was introduced in 1988, incidence rates have risen to 114 per 100,000 but mortality has fallen to 30 per 100,000. Therefore, we need to keep the cancer definition relevant to critical instances, especially as cancer is the biggest source of critical-illness claims.
We are also seeing improved diagnostic equipment for strokes. MRI scans are becoming more powerful and can highlight much smaller evidence of a stroke than previously. These strokes are the same as silent heart attacks – they may have no impact on quality of life and can be treated to avoid deterioration but could lead to a claim under current rules,.
For now, the darkest clouds over critical-illness insurance have passed and this popular product is still available. However, we should not be surprised to see tighter definitions of critical illnesses and specific conditions being removed.
This is not insurers and reassurers trying to withdraw the product or reduce claims. They are simply keeping the current products available and affordable.