In a little over a month, LV=, Zurich and Aviva have all made further improvements to their critical illness policies in an effort to stay ahead of the game and gain meaningful share of the critical illness market.
These are the latest in a series of changes to critical illness insurance in recent years and it is important to understand which changes provide relevant benefits to a significant number of people, as opposed to those that have enabled life insurance companies to make eye-catching claims about the extent of cover they provide.
The first major change to critial illness policies was around the number of medical definitions covered, with each provider adding more and more definitions in a bid to be the most ‘comprehensive’. This was followed by a focus on quality and the move to offer enhancements on the ABI (Association of British Insurers) standard definitions for major diseases. The latest battle ground is partial payments for conditions that are not quite serious enough to warrant a full payment but could still impact on family finances during treatment and recovery. All of these areas are important and of course everyone wants the most comprehensive, best quality cover, but the plethora of changes has made deciding which policy to opt for a real challenge.
The point of a critical illness insurance is to make a very difficult financial situation (created by serious illness) a little easier to manage, so the really important thing is that a policy offers the best possible cover in the areas that really matter. The most important areas that account for 85% of all critical illness claims are cancer, heart attack, stroke and MS. So how do the latest changes fare in terms of adding real value in these important areas?
LV=’s changes are perhaps the most dramatic in the context of the big four diseases. They already exceeded the ABI standard definition for all four, but they have built on this by adding a full payment definition for cardiac arrest, and partial payments for minor stroke and minor heart attack, ensuring that less severe conditions will receive some financial payment. On the cancer front, more partial payments have been added which is important as with increased early screening, more diagnoses are being made earlier prior to the disease reaching full claim stage. LV= now cover five early stage cancers.
In addition to improvements in these main claim areas, LV= has also built in additional payments where certain conditions are caused as a result of an accident, paying double the claim value to a £200,000 maximum. They will also pay up to 1.5 x the sum assured where certain neurological illnesses are diagnosed before the age of 45, again subject to a £200,000 cap. These additional payments are unique to LV= and offer real additional benefit to policy holders.
Zurich’s update was more geared towards them catching up with the rest of the market. They have added two new full payments for spinal cord tumour and removal of a lung, and six partial payments including four early stage cancer definitions. However they have not addressed the rest of their contract and remain at the ABI standard definition for cancer and MS, and all heart surgery options require open heart surgery treatment where other providers have moved to allowing keyhole surgery to reflect changing medical practices. Also, they have not caught up with other providers in accident definitions like loss or paralysis of limbs, still requiring loss to apply to two limbs not the more common, and more regularly claimed for, loss of one.
Aviva’s update also offers enhancement in the main claim areas. A key improvement is the reduction in the measure for a heart attack, which will enable a greater number of people suffering a heart attack to make a claim. They have also added cardiac arrest and spinal stroke to increase the scope for the of main claim areas, although spinal stroke is a much less common event than a “normal” stroke. Some other changes, however, are more obscure. “Devic’s Disease” has been added as a full payment definition and bladder removal as a partial payment definition and yet their occurrence is generally infrequent. Devic’s Disease is a debilitating condition with symptoms similar to MS, but affects only 5-20 people per million of population. Bladder removal affected just 650 people in 2011 and was carried out generally for advanced cancer cases, where a full payment would have been made under the cancer definition. Both are good examples of increasing the number of definitions offered by a policy, but where it is quite unlikely to result in any claims.
In selecting a critical illness policy, the covers to focus on are the ones that are most likely to pay out; cancer, heart conditions, stroke and MS. If you are looking for added value, improvements in these key areas far outweigh the addition of less prevalent illnesses.