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Partial critical illness payments are only half the story

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Partial payments are fast becoming the new tool that insurers are using to promote the benefits of their critical illness plans.

Once we were subjected to counting condition numbers and then to the accumulation of ABI+ conditions, both a dubious mechanism for comparison, and the current PP race could prove equally fruitless.

Readers might be forgiven for believing that the concept of PPs was first introduced to the UK by PruProtect with its severity-based plan. In fact, Virgin’s cancer plan and Royal Liver’s Progress offering both came earlier but it was actually Skandia, in June 2003, that first brought the idea to fruition.

Let’s get rid of one quaint notion – including partial payments is in itself no real guide to the quality of a contract. This is because both the claim definition and the amount payable vary greatly.

Take carcinoma in situ of the breast. Table 1, below, shows that the maximum payment stretches from £12,500 with Ageas, Friends Life and LV= to £25,000 with Legal & General and Skandia.

Similarly, one insurer insists on a full mastectomy whilst others meet a claim where breast-conserving surgery such as lumpectomy and segmentectomy is performed. Less than 50 per cent of surgery results in a full mastectomy, so advisers need to be clear to their clients about what exactly is being covered.

Table 1 – Partial payments for carcinoma in situ of the breast

Source: CI Expert
  Max £ Max % Claim Requirements

Aegon

£25,000

25%

Treated by full mastectomy

Ageas

£12,500

12.5%

Treated by any surgery to remove tumour

Aviva

£20,000

20%

Treated by any surgery to remove tumour

Bright Grey (menu)

£15,000

20%

Treated by lumpectomy, cystectomy, partial mastectomy

Friends Life

£12,500

12.5%

Treated by lumpectomy, cystectomy, partial mastectomy

LV=

£12,500

12.5%

Treated by any surgery to remove tumour

Legal & General

£25,000

25%

Treated by any surgery to remove tumour

PruProtect

No limit

25%

Treated by full mastectomy

PruProtect

No limit

10%

Treated by lumpectomy, cystectomy, partial mastectomy

Scottish Provident

£15,000

20%

Treated by lumpectomy, cystectomy, partial mastectomy

Skandia

£25,000

25%

Treated by any surgery to remove tumour

Zurich (gtd rates)

£15,000

20%

Treated by mastectomy or lumpectomy

Early-stage prostate cancer provides a comparable picture with definitions and amounts payable varying substantially. Table 2 confirms that this condition also lacks any consistency, with some, such as LV= paying up to £12,500, £15,000 and £25,000 depending on the condition. Skandia and Aviva do achieve uniformity by ensuring that all payments are the lower of £25,000 or 25 per cent and £20,000 of 20 per cent of the sum insured respectively.

PruProtect excels by not limiting payments to a monetary figure and also by not insisting on any form of treatment. Only 70 per cent of diagnoses result in immediate treatment with the remainder being kept under active surveillance so this definition is over 40 per cent more likely to result in a successful claim.

Table 2: Partial payment for early stage prostate cancer

Source: CI Expert
  Max £ Max % Claim Requirements

Aegon

£25,000

25%

Prostatectomy, external beam & interstitial implant radiotherapy

Ageas

£25,000

25%

Prostatectomy, external beam & interstitial implant radiotherapy

Aviva

£20,000

20%

Prostatectomy, external beam, interstitial implant radiotherapy, ultrasound, hormone therapy or cryotherapy

Bright Grey (menu)

£15,000

20%

Prostatectomy, external beam & interstitial implant radiotherapy

Friends Life

£25,000

25%

Prostatectomy, external beam & interstitial implant radiotherapy

LV=

£25,000

25%

Prostatectomy, external beam, interstitial implant radiotherapy, ultrasound, hormone therapy or cryotherapy

Legal & General

£25,000

25%

Any treatment

PruProtect

No limit

25%

On diagnosis only

Scottish Provident

£15,000

20%

Prostatectomy, external beam & interstitial implant radiotherapy

Skandia

£25,000

25%

Prostatectomy, external beam & interstitial implant radiotherapy

Zurich (gtd rates)

£15,000

20%

Prostatectomy, external beam & interstitial implant radiotherapy

Four insurers include hysterectomy due to carcinoma in situ of the cervix.

Friends Life and LV= keep to the lower of 12.5 per cent or £12,500, with Aviva going to 20 per cent or £20,000 and Skandia to 25 per cent or £25,000.

Figures indicate that around 10 per cent of diagnoses are treated by hysterectomy with the majority being women of non-childbearing age.

As with any critical illness condition the value is in the claim wording.

Like a red-top newspaper, the headline is often undermined by the story within. CIExpert seeks to remove this mystique and inform advisers about the sausage and not the sizzle.

Alan Lakey is founder of CI Expert

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