The age of cover

By: Nicholas van der Nest, Divisional Director of Risk Product Innovation at Liberty

While Jim Morrison informed us in the 60s that we were living in ‘the age of Aquarius’, it seems policyholders today are living in the age of cancer. Nicholas van der Nest, Divisional Director of Risk Product Innovation at Liberty, sets the record straight about cancer-related CI and Disability cover products.

Critical illness products continue gaining popularity amongst clients, potentially as a result of most clients having some form of exposure to or at least knowing of someone who suffered an illness like cancer.

From a claims perspective cancerrelated claims also continue increasing year on year relative to other conditions, suggesting that these products serve a real need, as intended.

Within the industry various versions of critical illness benefits exist currently, ranging from those who cover a limited number of definitions at high severity levels only to fully comprehensive versions providing cover for a large number of potential illnesses, at different levels of severity. Financial advisers tend to sell the latter mostly. Within this category most companies aim to be as comprehensive as possible in their coverage, both in terms of the number of conditions covered and the level of severity at which claims become payable (through tiering of benefits).

Although the benefits offered by most companies are fairly similar (and difficult to compare in detail without a medical background owing to the need for objective medical assessment criteria), benefits generally tend to be differentiated in two main areas:

  • Breadth of cover: This is usually allowed for in the form of a catch-all benefit category, allowing for cover against illnesses not specifically mentioned in the product, but which are expected to have a significant impact on lifestyle and carry a likely cost in terms of making lifestyle adjustments. The strength of the catch-all category definition is fairly easy to measure without having a medical background and generally uses an objective assessment criteria.
  • Future-proof benefit definitions: As benefit definitions rely on medical definitions, results of diagnostic tests and procedures, there is a risk to policyholders that benefits may not be paid where medical advancements lead to the discontinuation of a medical test or procedure. Only a few companies offer benefits designed to be future proof in this regard. Liberty’s benefit automatically includes a feature (Medical Advancements Protection) which ensures that claims remain payable even if a diagnostic test or procedure is replaced with an improved version, provided the severity of the condition suffered is similar.

It is unclear how well customers really understand these products, with a growing number of customers considering the benefit in the same light as medical aid cover. The reality is that the products are very different, with the latter aiming to indemnify against the cost of medical treatment and the former aiming to meet the (non-medical) costs associated with making lifestyle adjustments following an illness instead. As an adviser it is important to ensure that customers fully understand this difference.

It is also important to ensure that customers are made aware of specific conditions that are not covered under a contract, in addition to considering the breadth of cover (catch all benefit) and future proofing of the definition of illnesses covered.

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