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TPD, or not to be – that is the question

The ABI’s statement of best practice for critical illness cover consultation paper has finally been published and its proposal to scrap total permanent disability has created intense industry debate.

The statement proposes TPD be removed from CI policies by 2010, and replaced with 10 new ABI definitions, including conditions such as loss of hand or foot rather than loss of both limbs.

To date, TPD accounts for just 3 per cent of all CI claims. Fifty five per cent of those claims are declined, with 35 per cent finding their way to the Financial Ombudsman Service.

ABI assistant director of health and protection Nick Kirwan says this simply is “too high”, and work had to be done around TPD.

He says: “I’m pleased with the way that everything has come together now and it will make for a very interesting consultation.”

Providers, however, are now questioning whether it will bring greater clarity or more confusion, and whether or not more claims will be paid as a result of the changes.

Aegon UK personal finance PR manager Mark Locke questions whether adding more conditions will address the underlying issue in “any meaningful way”.

He says: “Adding more conditions may be one way of solving the problem, however there will also be other ways of reaching a workable solution.”

Locke says the 2010 implementation deadline is a tad “optimistic”, and the cost of implementation across systems, policy terms and conditions and marketing literature will be substantial.

Lifesearch senior policy adviser Matt Morris welcomes the proposal, and says a 12-month implementation period is long enough for the insurers to get their houses in order.

He says: “The only potential problem is that the new conditions that replace TPD must be clear and concise, as vagueness will only lead to declined claims and further problems.”

Le Beau Visage managing director and the Income Protection Task Force chairman Peter Le Beau says: “I am not sure whether twelve months is long enough to implement the changes. It should be but some IT departments take a year to change a light-bulb so there may be howls from some quarters at implementing these revisions.”

Pru Protect director of protection Kevin Carr is now encouraging anyone with a strong interest in protection to “read this paper, digest it and respond accordingly”.

The ABI has also revealed that it is revisiting its Statement of Best Practice for Income Protection next year.
The paper, which a falls under the ABI Life Insurance Selling Code of Practice, will be reassessed in 2010, five years since its last review in 2005.

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