Guide to Critical Illness
How to provide the best solution for your clients
Critical illness has been a product that has been available since the 1980s, and has evolved much from the initial big three diseases it covered: cancer, heart attack and stroke.
As medical science has developed, and more conditions have become treatable so the available illnesses to cover have become extended.
But as a consequence this has made seeking CI cover more complex, and the task for financial advisers more challenging.
In recent years, the protection industry has realised that everyone would be much better off if the terms were simplified, and the process of applying for the product more straightforward.
Also it has become apparent that other areas that were not previously covered, should be, such as mid-life diagnoses of serious conditions, or illness in childhood.
But above all, financial advisers are realising that they need to know more about protection - what is available and how to get their clients on the right policy.
Hopefully this guide will go some way towards addressing those needs.
It is worth an indicative 60 minutes of CPD, bankable at the end of this guide.
Critical illness has got simpler
The world of critical illness protection is shifting. Long gone are the days of lengthy documents listing the hundreds of illnesses covered by the policy, each with their own wordy, complicated definition it would take a doctor to decipher.
In the ‘before time’, insurers raced to have as many illnesses covered as possible in order to proudly announce their deadly disease cover count.
Guardian has led the charge on the simplification of CI policies and protection in general
But in reality, this confused consumers, made submitting a claim an arduous task and rendered a major chunk of the illnesses listed redundant.
For example, if the policy covers a loss of two limbs you can be fairly sure it covers the loss of one.
Luckily a touch of common sense, a pinch of pragmatism and a few strong challenger firms have shaken up the system in recent years, causing a flurry of providers to strip back their policies and simplify the claims process.
Protection challenger Guardian has led the charge on the simplification of CI policies and protection in general.
Launched in May 2018 the provider sprung into the market with a pledge to broaden critical illness coverage, boasting clear definitions and a pay out on a doctor’s word.
Although this resulted in costly premiums considered too expensive by most advisers — which led Guardian to downgrade a number of definitions to require treatment or result in smaller payouts — it still remains one of the very best policies on the market, using simple and clear wording to help consumers understand their plan.
The positive reaction to what the firm was trying to achieve also prompted other providers to take stock and amend their own lengthy list.
Adam Higgs, head of research at Protection Guru (FTRC), said: “The critical illness market has finally moved on from purely playing a numbers game and in recent times we have seen a focus by some insurers on broadening their current definitions in order to provide consumers with wider cover.
The critical illness market has finally moved on from purely playing a numbers game
“Guardian are a prime example of this with their heart attack definition that only requires a definite diagnosis from a UK cardiologist as opposed to specific positive tests.”
While no other provider has been as bold as Guardian, we have seen positive changes from a number of insurers when it comes to CI.
In July last year Aviva fine-tuned its CI plans in a bid to reduce potential confusion.
It removed the ‘loss of speech’ condition after 15 years of not paying out a single claim due to the illness.
In the overwhelming majority of instances, a claimant loses their speech due to cancer or a stroke which are, of course, included as separate conditions.
Baby steps, but a move in the right direction.
Legal & General overhauled its policy around the same time and now offers a simplified list of conditions.
‘Open heart surgery’ and ‘coronary artery by-pass grafts’ now fall under one condition of ‘specified heart surgery’ while two separate ‘drug resistant epilepsy’ conditions have been merged into one.
The three conditions resulting in a loss of use of a hand or foot — entire loss, loss of use or paralysis — now fall under one section.
One 'catch-all' definition
A hefty 13 cancer conditions have been replaced with one ‘catch all’ definition.
A number of insurers, including Royal London, have recently changed their low grade prostate cancer definition to allow those who do not require treatment to be included within the scope.
The move provides broader cover on conditions clients are more likely to claim on.
Alan Lakey, director of CIExpert, said: “Over the past five years we have noticed a move towards greater simplicity with the additional removal of ambiguity.
“The conditions race seems to have ended with insurers actually reducing the condition numbers either by the removal of pointless conditions — such as HIV and loss of speech — or by consolidating conditions into groups of similar or connected conditions.”
The conditions race seems to have ended with insurers actually reducing the condition numbers
Chief marketing officer at LifeSearch, Emma Walker, agreed, saying the industry had seen an “evolution of CI”.
She added: “Long gone are the standards of losing two limbs before you can get a pay out, troponin levels (indication of a heart attack) have come down, and you no longer need to be in a coma for weeks on end to satisfy the wording on a policy document.”
Providers have also shifted their claims process in a bid to become friendlier and more supportive.
Insurers such as Vitality have introduced a telephone based claims service where claimants can speak to qualified nurses, meaning there is often no need for further medical evidence or unnecessary paperwork.
Deepak Jobanputra, managing director at Vitality Life, said claiming on an insurance policy was likely to be a “stressful time” and thought it was critical insurers made the process as easy as possible.
Royal London has introduced ‘additional condition payments to their critical illness policies.
This applies to less severe illnesses where a main definition is not satisfied but the customer has still experienced a significant event, such as the diagnosis of an early stage cancer.
The firm’s underwriting and claims manager, Craig Paterson, said this went some way to addressing the “binary” nature of CI.
The claims process has been further improved by the Protection Distributors Group, formed in 2016 as a ‘force for good’ in protection.
In 2018 the group introduced a Claims Charter, stating a dedicated claims team should be available, with a phone-based claims process for claimants to submit and manage their claim, and that no potential claimant can be turned away by anyone not on the claims team.
More than 15 providers have signed the pledge.
Despite the fact Mr Lakey thought the improvements to the claims process and CI definitions had “sped up” over the past 18 months, he argued there was “still much work to do”.
“Sometimes insurers seem to forget that their target market has very little medical knowledge or appetite for delving through reams of pages to assess what they are covered for”, he said.
Should you get critical illness cover for children?
No parent wants to think about the prospect of their child becoming sick.
But if the worst happens, having children’s critical-illness (CI) cover could help ease the financial strain.
Some birth defects are now covered, that were not predictable before birth
And providers are adapting their policies to make sure more conditions are covered from birth, rather than from a month old.
This can mean that some birth defects are now covered, that were not predictable before birth and as a result, parents can fund time off work or any adaptations required to their homes.
For instance, Zurich’s children’s CI policy starts from birth and covers birth defects (with some exclusions).
Its ‘enhanced’ version covers children for the same 99 conditions that adults are covered for under a similar policy, as well as child-specific conditions, including spina bifida, cerebral palsy and Down’s syndrome, paying out up to £25,000 (up to £50,000 for cancer).
The policy applies to natural, step and adopted children, up to the age of 22.
Aviva’s children’s CI policy also starts from birth, if parents select the upgraded version and extends to at least age 18 or 22, depending on the level of cover.
It includes a minimum of 36 conditions, such as coma, deafness, kidney failure and third-degree burns.
To give another example, AIG Life covers children from birth, including for congenital and familial conditions, although if a child is diagnosed with a CI condition before they are born, they must survive 10 days after birth, for a claim to be made.
It pays out up to £35,000 on 10 child-specific conditions, as well as on those which can affect adults too.
Its cover also includes eight pregnancy-related conditions, paying out £5,000 where these arise.
Broaching the subject
It is one thing to talk about investment portfolios and pensions with a client.
Raising the subject of their children’s health is a very different discussion, as Tim Lewis, propositions manager at AIG Life acknowledges: “It is an emotive subject and financial advisers have found it difficult to talk about children’s CI.
It is hard to imagine, but the reality is that some children do fall seriously ill
“However, AIG and other providers have improved their materials to help advisers have those difficult conversations with parents.”
And it’s a discussion well worth having, no matter how painful it might be, as Peter Hamilton, head of retail protection at Zurich observes: “It is hard to imagine, but the reality is that some children do fall seriously ill.
“Parents who have benefited from the cover will be glad that they had that difficult conversation.”
Children’s CI cover is sometimes included with adult CI cover.
This means that not everyone who has children’s CI cover set out to buy it, but some are glad to discover it is there, as adviser Scott Gallacher of Rowley Turton observes: “Often people don’t realise they have it or don’t think about it until something happens, but children’s CI would be a godsend for those who need it.”
Craig Paterson, underwriting and claims philosophy manager at Royal London takes a similar view, highlighting how the money can ease the financial strain: “A financial payout brings security.
“In some cases, parents may be able to seek out treatment not available on the NHS, or abroad. Some may also want to use it to give a sick child a holiday.”
Mr Lewis agrees that financial support can make all the difference, as he explains: “As a father, the thought of anything happening to my children breaks my heart.
“I’d want to do anything I could to make sure my child got the best care possible.”
According to Mr Paterson, more and more parents are actively seeking out child CI cover, in the course of organising their financial affairs, as he observes: “In the past, child CI was an afterthought, but things have changed in the last five to 10 years.”
This is evidenced by Royal London figures, which show that children’s CI was the fourth main reason for a claim on its CI cover in 2018.
We are seeing more financial adviser activity, in that they are discussing it as part of a family package of protection
Jacqueline Kerwood, claims philosophy manager at Aviva UK Life Protection also perceives more interest in the product from parents, as she says: “There is good awareness of children’s CI.
“We are seeing more financial adviser activity, in that they are discussing it as part of a family package of protection.”
Parents without a financial adviser could be missing out, though, as she adds: “Public awareness of child CI is not as high – we see people crowdfunding where child CI could have covered the cost in the first place.”
There is more to children’s CI policies than paying out on a wide number of illnesses, however, as Emma Walker, chief marketing officer at LifeSearch insurance brokers points out: “When looking at children’s cover it’s not just the conditions covered that’s important, but also the ‘added value’ elements.
“What we need is for the industry to shout more about these benefits.”
And there is evidence that the industry shares the view about the importance of added value, as Justin Harper, head of protection marketing at LV= explains: “We’re looking to make further improvements to children’s CI cover in 2020, including supporting younger adults with mental health issues.”
He adds: “We are also proud of our after care.
“For example, we received a claim some years after a policy had lapsed as the parents had been unaware that their daughter was covered under the policy. We decided to pay the claim, and this offered some real financial assistance for the family.”
Fiona Nicolson is a freelance journalist
What happens if you get diagnosed with illness pre mid-life?
Diagnosis of a critical illness (CI) is a life-changing event, not just for people’s health; it can seriously damage their financial stability too.
People in their later years may be better set up to cope with the financial devastation it can cause – for instance if they are mortgage-free and in receipt of a decent pension.
But for those who are still working (or starting their career), have a hefty mortgage or who have young children, the financial hardship could be particularly burdensome.
The average age of Zurich's CI claimants last year was 37 for ovarian cancer and 44 for leukaemia
And it is clear that younger generations are at risk.
To give a few examples, according to Zurich, the average age of their CI claimants last year was 37 for ovarian cancer and 44 for leukaemia.
However, some providers of CI policies offer cover specifically for people diagnosed earlier than might be expected.
Vitality’s serious illness cover’s ‘booster’ provides 200 per cent of cover for customers diagnosed with specific, debilitating long-term conditions, at age 24 or younger.
The figure decreases by 2.5 per cent per year, according to age at diagnosis, so for those diagnosed at an older age, the booster would be less.
Aviva’s ‘extra care cover’, available as an add-on to its CI policy, adds £50,000 to the customer’s standard cover, when diagnosed under the age of 55, with kidney failure, dementia, liver failure, Parkinson’s disease, motor neurone disease or respiratory failure.
If they have enhanced CI cover, Aviva will also pay out on the same basis, for Parkinson’s Plus syndrome or heart failure.
LV= has taken pre-mid-life generations into consideration too, offering additional cover for four neurological conditions, where the customer is diagnosed before they reach age 55.
In such cases, LV= pays out double the cover up to a maximum of £200,000, as well as the original level of cover, capped at £450,000.
This encompasses Alzheimer’s disease or other forms of dementia; motor neurone disease; Parkinson’s disease and Parkinson’s Plus syndrome.
There is one condition we all suffer from, which could deter us from considering the risk of a critical illness when young: we prefer to believe it will not happen to us, as Justin Harper, head of protection marketing at LV= explains: “We all have ‘invincibility syndrome’.
“But these life-changing events can and do happen at an earlier age, and have long-lasting effects.
Being diagnosed young happens to a relatively low number of people
“For instance, two of our members have been diagnosed with Parkinson’s disease − one at the age of 26 and one at age 30.
“Thankfully, being diagnosed young happens to a relatively low number of people.
“However, it can impact on your ability to work − yet you might live for many years − and it might mean making changes to your house or requiring a full-time carer.”
But that relatively low number of people is still considerable, as Deepak Jobanputra, managing director at VitalityLife reveals: “Our youngest adult claimant was 23 – they had a stroke.
“Fifteen percent of our CI claims come from people under the age of 30, with 30 per cent made by 30-39 year olds.
“That means that nearly half of our claims come from people under the age of 39.”
Insurers providing extra cover for people diagnosed at a younger age is a positive move, according to Rob Harvey, head of protection advice at Drewberry: “It is a useful feature to be included in CI cover, because if you’re diagnosed early, the impact can be that much greater, as your financial situation might be more precarious.”
He adds: “This cover is not widely known about by consumers; advisers need to be having these discussions with their younger clients.”
And CI alone is not enough, whether it includes early-diagnosis cover or not, as Mr Harvey points out: “It’s important to have income protection running alongside your CI cover.”
Some CI providers, who don’t offer additional cover for people diagnosed early, take an alternative view on its value.
Jennifer Gilchrist, protection adviser at Royal London explains: “Our philosophy is to provide good outcomes for the customer, so we factor in what they might need anyway.”
She adds: “We look at the probabilities of where people need cover, at different ages. Young people’s claims are often for accidents and injuries.”
While Zurich also does not offer cover specifically for people diagnosed early, it does address the possibility of sporting accidents, as Peter Hamilton, head of retail protection explains: “We have ‘multi-fracture cover’ as an add on, which pays up to £6,000 for breaks or tears.
“Injury causes have ranged from a slip or a trip to a tackle on the football pitch.
“Most of these have no long-term effects, but customers have used the money to cover their bills if they’ve been unable to work for a few weeks or to pay for taxis to and from work if they’ve been unable to drive or use public transport.”
Another provider, which does not offer this cover, believes that younger customers’ needs might be better addressed differently, as Simon Jacobs, head of claims and underwriting at Aegon suggests: “Customers under 55 are more likely to need support on issues such as mental health; bereavement; family concerns; and legal and debt issues.”
Finally, cost is an issue for consideration too, as Tim Lewis, propositions manager at AIG Life observes of additional CI benefits (which AIG does not provide): “They have their place in offering the customer more choice, but they can make the product more expensive.”
Fiona Nicolson is a freelance journalist
Resources exist for advisers new to Critical Illness
When the first critical illness (CI) product was launched in 1983, after being developed by cancer surgeon Marius Barnard, it only featured three conditions.
These were: heart attack, cancer and stroke.
Since then the number of conditions have increased exponentially.
At the same time, the critical illness market has remained fairly flat over the past decade, against a backdrop of an ageing population.
Both factors have served to create a knowledge and skills gap in the advisory sector, when it comes to buying critical illness products for clients.
So how big is the problem?
According to government figures, one in four of UK employees report having a physical health condition, while one in three say they have a long-term health condition.
One in eight of current employees also reported having a mental health condition.
And as much as 42 per cent of employees with a health condition felt their condition affected their work a great deal or to some extent.
“There is a very real skills gap,” Johnny Timpson protection specialist at Scottish Widows says.
We only have about 10 per cent of advisers writing protection business on a regular basis.
“On the face of it, if you look at new business figures the critical illness market is performing pretty well, but the issue we do face is we have about 35,000 regulatory firms with permissions to write protection business and that includes CI, but we only have about 10 per cent doing it on a regular basis.
Source: Swiss Re Protect Association Term and Health Watch 2019
“We have seen that [following regulation like] the retail distribution review (RDR), a significant number of financial advisers have repositioned their business models to focus on pensions, investments and wealth management.
“The result of that has been the de-prioritisation of both individual and group financial protection, particularly where the needs are a lot more complicated, or where people have disabilities and pre-existing health conditions.”
It is not just the increase in the number and terms of conditions that is adding layers of complexities, it is also the way in which the payments are being made.
Providers have largely moved away from making lump sum payments to paying out partial payments.
They also offer residual and additional payments, which sometimes can be difficult for the adviser to ascertain which is the best option for a client.
Mr Timpson adds: “We have seen huge amounts of complexity evolve in the marketplace over the last 15 years in particular and I think speaking of wealth, pension and investment advisers, that has just made CI incredibly complex and gives them even more reason to disengage with that product.”
Kathryn Knowles, managing director of Cura Financial Services adds: “We have seen over a number of years that more conditions are being added to critical illness policies.
“There seems to have been a history of one-upmanship of who can offer the most critical illness policies to their clients.
“I don’t know the answer, but I would be interested to know the actual probability of someone being diagnosed with one of the additional illnesses that continue to be added to the contracts.
“For me, I would prefer to see insurers improve their definitions of core conditions like cancer, heart attack and stroke, where claims are most likely.”
So what can advisers do themselves to deal with the knowledge and skills gap?
Mr Timpson says they can collaborate with protection specialists, such as the likes of Cura, Sesame Bankhall Group, or Lifesearch.
Advisers can also get involved in the new signposting service launched by the DWP's Access to Insurance Working Group, which Mr Timpson chairs.
It is being rolled out with the backing of the Chartered Insurance Institute (CII) and other trade bodies including the British Insurance Brokers’ Association (Biba).
The idea is that where an adviser might feel they are inadequately equipped to place protection cover for a client, they will signpost customers that they cannot help towards a firm that can.
It is the first signposting scheme for the protection sector.
Mr Timpson says: “One of the reasons we are launching this service is that increasingly, in recent years, people with disabilities and pre-existing conditions have been finding it harder to get cover and they have been complaining to their MPs and through the media.”
Another way advisers can improve their skills is by building their confidence, by taking the initiative to start having more conversations with their clients about CI.
Ms Knowles says: “It is worth having the conversation and as an adviser it is important that you make your clients aware of the options that they can access, even if it is not what they originally thought about.
“The main way to develop this skill, is to just start having the conversation.
Understanding critical illness cover can at times be pretty straightforward, and other times not the simplest of things
“You can use examples of successful critical illness cover payouts to demonstrate the worth of the policy, as long as this isn’t used as a scare tactic.
“Understanding critical illness cover can at times be pretty straightforward, and other times not the simplest of things.
“The core conditions and definitions are often quite generic.
“The main problems come when you start needing to consider conditions that go beyond those recommended by the ABI.”
This is where taking advantage of available resources can help.
According to protection specialists, CI Expert offers an easy user interface and presents comparisons between provider offerings clearly.
It can also offer comparisons of modern contracts, to retrospective offerings, which I would see as essential for an adviser suggesting a client review their current policies.
UnderwriteMe offers a basic summary of the critical illness contract, when the decision page is reached on an application.
The number of illnesses covered is provided, which allows an adviser to quickly see which insurer is offering the most cover.
Ms Knowles adds: “My only concern with this approach, is advisers relying on this, having the most conditions isn’t necessarily the sign of the best contract.”
You should never sell CI by price alone
FTRC offers an interface that allows an adviser to compare critical illness cover, directly alongside many other aspects of the insurer and policy.
Roy McLoughlin, a financial adviser at Cavendish Ware, says: “Resources will give you a reason for using or not using a certain product.
“You should never sell CI by price alone. It should be the quality of the contract and you need that help.”
“The untrained eye will sell by price alone, but how do you know that it’s the best or the most comprehensive?”
Some people advocate for a separate protection-focused qualification while others say that advisers should concentrate more on their continuous personal development.
Some providers are also doing more to help advisers, although Ms Knowles stresses more could be done.
“There is a lot of choice at the moment with critical illness cover and I both like this, and don’t like it,” Ms Knowles adds.
“I encourage all insurers to improve their critical illness offerings, but not by simply adding more and more conditions to the policy, but by improving definitions.”
It’s over 35 years since Dr Marius Barnard devised the first protection insurance, initially named ‘Dread Disease,’ which he developed having seen first-hand the financial implications his patients suffered following a serious illness.
We were honoured to have worked closely with Marius to develop our own critical illness cover, and while sadly Marius is no longer with us, we made him a promise to safeguard his vision of creating accessible, affordable Critical Illness cover to support our customers when they need it most.
Challenges in the market over the last few years haven’t always made this an easy promise to deliver.
Product terms & conditions have become longer and more complex, making it less easy for customers to understand what they are covered for and when to claim.
Considering that less than one in 10 (9%) people in the UK have critical illness cover*, we need to do everything we can to make what’s seen as a complex product easier to understand.
We’re continuing to focus on the things that matter to our customers and one of our objectives was a clear commitment to ensuring simplicity in our product and the language that we use.
I’m proud to say that the recent refresh of our critical illness cover delivers on this, and our promise to Marius.
In this refresh, we’ve concentrated on refining the definitions we receive most claims on while also adding in extra elements to ensure the cover is as comprehensive as possible.
This in turn will make it easier to talk about critical illness cover with your clients and explain the breadth of protection on offer.
– Simplified conditions - we’ve combined some conditions and grouped 30 main conditions under 5 easy to understand headings and visualised these through the image of the body: Senses, Heart & Arteries, Organs, Brain & Neurological, and Cancer
• A quick and simple way for clients to see what they’re covered for
• Engaging imagery being used in product literature to display what’s covered
• By combining definitions we’re cutting down on lengthy literature for your clients to review
– New condition - we’ve added heart failure as a new full definition. Whilst we already cover heart attack and cardiomyopathy which may lead to heart failure, there are lots of causes. By adding this new definition we are making cover for heart related condition more comprehensive given it is one of the most common reasons for claim.
– Additional conditions - we’ve added 4 new additional conditions, providing pay-outs of up to £30k, to ensure our cover is as comprehensive as possible.
– Widened the scope – we’ve made changes to existing definitions which will increase the likelihood of a pay out at claim stage, for example widened the scope of cardiomyopathy, reduced the deafness decibel criteria, included criteria to cover spinal aneurysm and included thoracotomy within structural heart surgery.
Scott Cadger is head of claims and underwriting strategy at Scottish Widows