View more on these topics

Medical matters

The last 12 months have seen a number of new and important players entering the protection market. At the same time, issues such as genetic testing and prostate cancer screening have topped the news agenda. I would like to draw your attention to these emerging issues and their potential impact on the protection market.

Genetic testing is probably the issue which has attracted most attention. The important thing to be clear about here is that no insurance company has ever asked a consumer to take a genetic test.

The debate is not about whether or not consumers should take genetic tests. The issue is whether or not consumers who have already taken a genetic test should be obliged to disclose the results of the test to an insurer when they are applying for all forms of protection assurance.

The Government is assessing reports the human genetics commission and ABI have each submitted to the Government select committee.

The Government may also be influenced by the representations of the House of Commons science and technology select committee. In May 2001 the ABI amended the existing moratorium on the use of genetic test results. The revised recommendation stated that no genetic test results were to be used for any form of insurance up to a sum assured of £300,000.

Above this level, only tests approved by the Government&#39s genetics and insurance committee could be used, which in practice only applies to Huntington&#39s chorea for life insurance cover only. The duration of the ABI moratorium is two years.

In contrast, the HGC has recommended that the moratorium should apply to sums assured of up to of £500,000 and that it should remain in place for three years. The select committee&#39s recommendations are due to be debated in the House of Commons in October. Those involved in the protection industry will await the outcome with great interest.

While on the subject of critical illness, there has been much discussion over the past few months on the impact of the Government&#39s proposals for a national screening programme for prostate cancer.

There are pilot schemes of this programme currently under way. This form of cancer can remain undetected for many years and is often found incidentally at death through a different cause. But it is likely that a screening programme for men over the age of 50 will highlight many more cases than are found at present and more claims will be paid out than was originally envisaged.

Bear in mind that critical-illness insurance was originally designed to provide cover for those diseases which resulted in significant lifestyle changes. However, it is thought that many early prostate cancers will not provoke this type of lifestyle change. As a result, a number of potential product changes may be developed.

One suggestion is to provide the prospective client with a choice of full cover or a reduced payment based on the stage the cancer has reached.

Either way, it is more than likely that with more choice of cover, IFAs will have to work through their recommendations using an understanding of medical terminology. Providers will have to be sympathetic to any changes that are made and assistance in the form of jargon-busting material must be made available.

In addition to these potential changes caused by a national screening programme, another issue which has emerged in recent weeks relates in general to the advances in medical science and their subsequent impact on the sustainability of guaranteed rates. The most hotly-debated area relates to heart disease.

The specific question is a protein called troponin and its use in the detection of myocardial infarction (heart attack). Two senior medical bodies have recommended that troponin is now used as the standard biochemical test within the World Health Organisation&#39s heart attack definition – which is currently used as the basis of the industry&#39s criticalillness definition.

If, as appears likely, the WHO definition changes to the use of troponin we could have a mismatch of expectations between doctors, policyholders and protection providers. Unfortunately, the change to troponin for insurers is not as simple as you may think.

The test is far more sensitive than the current version, with the result that far more heart attacks will be diagnosed with an ensuing impact on claims payment.

A number of industry experts feel that there will be roughly the same number of claims but paid out earlier. This is on the basis that many of those who are likely to receive payouts under the use of troponin would have eventually received payments under the old tests as their heart disease became more severe.

On the other hand, there are those who are more pessimistic and who feel that there will be increases in the overall number of claims with subsequent rate adjustments and threats to guarantees.

The pace of development of medical science is providing protection insurers with continuous challenges particularly in the field of critical illness. It is extremely difficult to predict how long it will be before the next issue for debate emerges.

Finally, let&#39s look at the issue of medical expenses and the recent breakdown of negotiations on fee increases between the ABI and the British Medical Association. The fees under discussion relate specifically to general practitioner&#39s reports and associated correspondence and medical examinations.

GPRs account for a large proportion of the medical expense budget of many life offices – with an estimated £30m being spent last year by insurance offices on all forms of report.

When life offices request a GPR as a result of information which a client has included on their application form, GPs currently charge the life office £31 for this service.

Revised figures have been mentioned of £44 to £46 for each GPR ,which represents an increase of almost 50 per cent. It is thought that this increase may be staggered over a number of years but at present no final agreement has been reached. The impact on the insurer&#39s expense assumptions will not be insignificant and with no final agreement in place the jury is out on how offices will react to whatever turns out to be the final outcome.

However, while direct increases in rates appear as a last resort, there will be little doubt that underwriters will look to reduce the amount of evidence they request and this in itself may precipitate changes in current practices.

Given the proliferation of emerging issues affecting the industry, IFAs should aim to keep abreast of developments, to enable them to deal effectively with any client queries as well as for their own benefit.

Leading life offices will be able to keep IFAs fully informed of legislatory changes, usually through an underwriting newsletter or by providing a helpline to deal with any queries. Access to the latest information on industry issues may be an important factor when choosing a protection provider.

Recommended

Marsden Building Society – Standard Discount

Tuesday, 4 September 2001.Discounted term: One year.Discount: 2 per cent.Payable rate: 4.3 per cent.Minimum loan: £1,000.Maximum loan: Up to 90 per cent of valuation subject to no maximum.Income multiples: Three times principal income plus second or 2.5 times joint.Arrangement fee: None.Redemption fee: 2 per cent of outstanding balance in first two years.Conditions: Compulsory payment protection […]

Pink gives 100 per cent effort

Pink Home Loans has introduced a 100 per cent mortgage that has a 1.5 per cent discount for the first year.The mortgage is available for loans of up to £150,000 and has a 1.5 per cent discount with a current payable rate of 5.25 per cent. Borrowers who pay this mortgage off during first three […]

Baronworth stoxx up growth

Baronworth Investment Services has joined forces with InvestlifeLuxembourg to produce the high income & growth bond.The product is a guaranteed equity bond and is aimed at themedium-risk investor looking for a product that gives either incomeor growth over a five-year period.Investors can choose to take either 2.44 per cent income everyquarter, 10.45 per cent income […]

Invesco Perpetual fund manager quits

Invesco Perpetual global dynamic theme fund manager Andrew Callender, 37, is t quit the firm and retire from fund management. Callender has run the £120m fund since he returned to the UK from the £120m fund since he returned to the UK from his role as Invesco&#39s Japan chief investment officer at the start of […]

China tech and Global Alpha: a new great leap forward

By Robin Geffen, Fund Manager and CEO

Internet giant Alibaba is exactly the type of entrepreneurial company that the high-conviction, top-performing Neptune Global Alpha Fund seeks to invest in. Established just 14 years ago in an apartment in Hangzhou, today Alibaba is larger than Amazon and eBay put together and is challenging some of the most powerful internet companies in the world…

Read more 


Important information

Investment risks

The value of an investment and any income from it can fall as well as rise and you may not get back the amount originally invested. Forecasts and past performance are not a guide to future performance. Some information and statistical data herein has been obtained from sources we believe to be reliable but in no way are warranted by us as to their accuracy or completeness. These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you of any change to our views.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com