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Advisers need fresh thinking on critical illness cover

Critical illness cover should be a pick and mix

While I appreciate companies are not particularly turned on by higher risk clients, there are millions of people deemed uninsurable in the personal critical illness market. Coupled with the ongoing debate of whether CI is still fit for purpose I thought I would put forward an idea.

Indeed, one thing I am learning in this industry is that we agree on a problem and decide change is needed, then go back to our day-to-day advising and repeat the process the following year. It is time we started throwing some new ideas into the mix.

Does anybody remember the Elixa 123 critical illness plan from Unum? It was a simple critical illness policy with three categories (life threatening, disabling and traumatic conditions) and you picked how much cover you wanted in each. A sort of pick and mix of critical illness cover. Okay, maybe it did not work at the time but the idea was interesting.

If I could design a critical illness policy today I would propose a modular plan. After all, it works in the PMI market. The product would allow advisers and clients to pick the categories and cover level they wanted based upon the client’s biggest concerns.

Example categories could include:

  • Cancer and tumours (invasive cancer, benign brain tumour, carcinoma in situ)
  • Strokes and neurological conditions (Parkinson’s disease, MS)
  • Heart disorders (heart surgery, heart attacks, cardiomyopathy)
  • Trauma cover (traumatic head injury, coma, loss of limbs, third degree burns)
  • Other conditions (HIV, SLE, major organ transplant).

In an ideal world each category would have a sweep-up definition to pick up those rare conditions that are just as serious but not listed, for example: “Any other neurological condition that is proven by suitable medical testing, performed by a qualified registered consultant, that results in a significant effect on lifestyle and ability to work.”

Look at how Vitality Life breaks down its illnesses into categories. This would be similar but you could reduce the cover for certain categories if budget was an issue. Almost like AIG’s Key 3 cover but with the flexibility to reduce down from a full CI contract, rather than a just a restriction to three conditions.

The best thing about this model is that it would allow people with certain “well controlled” health conditions to obtain personal critical illness cover.

More of the four million diabetics in the UK could get cover by removing cardiovascular risk like heart disorders, people with MS could remove the neurological conditions (and blindness) and so on. Of course, it would need to remain simple so that the consumer can fully understand what they are buying and that presents one of the biggest challenges with such a proposal.

“The best thing about this model is that it would allow people with certain “well controlled” health conditions to obtain personal critical illness cover.”

As I am a sci-fi geek I would have to call this Next Generation Critical Illness Cover. Could a more flexible approach towards critical illness cover help reduce the UK’s £2.5trn protection gap?

I know it would not solve it but it could certainly help open the market to more people, with and without health conditions.

Alan Knowles is director of Cura. Follow them on twitter @Kathryn_Cura & @AlanK_Cura

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