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Protection Brief: CI Expert: Rebroking is not churning

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Many compliance officers, indeed many advisers, consider rebroking a critical-illness plan to be dangerous, perhaps even tantamount to churning. This view frequently colours their thinking and often results in older plans being retained even though a higher level of protection could be obtained using currently available plans.

It can be argued that advisers who fail to consider the potential benefits of current plans are in fact doing a disservice to their clients and I wonder whether one day a complaint will arise on the basis that an adviser owes his client a duty of care and failure to review a critical-illness plan may be viewed as a dereliction.

Let us clarify: rebroking is where replacing an existing plan is to the client’s benefit; churning is where it is solely to the adviser’s benefit.

What are the prime considerations when looking at an older plan?

First, is the client in fact eligible to consider a replacement plan? Will their health, occupation and pastimes allow such a change? 

The second issue to consider is cost and the third is whether a replacement plan is more likely to result in a successful claim.

Naturally, a successful rebroking exercise is dependent on the client being accepted and any replacement plan being affordable (not necessarily cheaper). This article assumes that all the above conditions have been met.

The CIExpert database provides a precise comparison of current and historical plans, enabling both adviser and client to comprehensively compare the merits of competing policies.

Some real-life examples substantiate this and show how an adviser can provide added value in a compliant manner. They also highlight how some rebroking exercises can prove disadvantageous to a client, thereby protecting both adviser and client against a possible future complaint.

Example one contrasts the current Ageas Protect plan with a January 2007 Friends Provident plan. The new plan offers 21 additional or more claims-friendly condition wordings. The older plan offers not one advantage and, subject to the usual caveats, offers a clear opportunity for an adviser to uplift his client’s cover.

Example 1Mr Bohan non-smoker age 45 – £165,000 – no children’s cover 

Existing policy

Friends Provident Jan 2007

New policy

Ageas Protect

Additional Conditions

None

Aplastic Anaemia

 

Cardiac Arrest

 

Cardiomyopathy

 

Chronic Lund Disease

 

Encephalitis

 

Liver Failure

 

Multiple System Atrophy

 

Primary Pulmonary Hypertension

 

Pulmonary Artery Replacement

 

Systemic Lupus Erythematosus

 

Traumatic Head Injury

 

 

Improved Conditions

None

Benign Brain Tumour

 

Blindness

 

Coronary Artery By-pass

 

Loss of Hands or Feet

 

Major Organ Transplant

 

Paralysis of Limbs

 

Stroke

 

Third Degree Burns

 

 

Additional Partial Payments

None

Carcinoma in situ of Breast

 

Carotid Artery Stenosis

 

Cerebral Aneurysm

 

Cerebral Arteriovenous Malform

 

Coronary Angioplasty

 

Diabetes Type 1

 

Early Stage Prostate Cancer

 

Testicular Carcinoma in situ

Differentiating Conditions

0

27

Example two is almost identical but the Friends Provident plan is exactly four years older and the client is a 55-year-old smoker. The new plan offers 26 condition advantages whereas the older plan has two – cancer and coronary angioplasty. However, given that the client is an older smoker, the impact of the superior cancer and coronary angioplasty conditions is such that the CIExpert system shows the older plan as being 5 per cent more likely to produce a successful claim. 

 
Example 2Mr Labbs smoker age 55 – £165,000 – no children’s cover 

Existing policy

Friends Provident Jan 2003

New policy

Ageas Protect

Additional Conditions

Coronary Angioplasty

Aplastic Anaemia

 

Cardiac Arrest

 

Cardiomyopathy

 

Chronic Lund Disease

 

Encephalitis

 

Liver Failure

 

Multiple System Atrophy

 

Primary Pulmonary Hypertension

 

Pulmonary Artery Replacement

 

Systemic Lupus Erythematosus

 

Traumatic Head Injury

 

 

Improved Conditions

Cancer  

Benign Brain Tumour

 

Blindness

 

Coronary Artery By-pass

 

Loss of Hands or Feet

 

Major Organ Transplant

 

Paralysis of Limbs

 

Stroke

 

Third Degree Burns

 

 

Additional Partial Payments

None

Carcinoma in situ of Breast

 

Carotid Artery Stenosis

 

Cerebral Aneurysm

 

Cerebral Arteriovenous Malform

 

Diabetes Type 1

 

Early Stage Prostate Cancer

 

Testicular Carcinoma in situ

 

 

Differentiating Conditions

2

26

Not all comparisons are as clear-cut as the two here and in many instances there will be a trade-off. 

The CIExpert system highlights the differences and provides comparative scores to assist advisers tasked with undertaking these comparisons. This enables a head-to-head analysis focused on the important distinctions and explains what relevance and importance they hold.

In summation, rebroking older critical-illness plans, particularly those for smokers and males, is fraught with potential dangers. 

But the cautious adviser who takes all necessary precautions can find himself with happy clients and a buoyant bank balance.

Alan Lakey is founder of CI Expert

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