The ABI has launched a three-month consultation on changes to its Statement of Best Practice for Critical Illness Cover. The main change proposed is to replace the Total Permanent Disability (TPD) clause included in critical illness insurance policies with a set of carefully worded definitions to ensure clarity for consumers about precisely what conditions are, and are not covered.
The majority of critical illness insurance claims are paid promptly as they are based on a straightforward diagnosis, but that is not always the case with TPD. Although TPD accounts for just 3% of claims, 55% of these are declined because the definition has not been met. We believe the current position is not sustainable, and these proposals address this.
Nick Kirwan, the ABI’s Assistant Director, Health and Protection, said:
“We have seen the number of declined claims fall significantly as a result of our ongoing determination to tackle this issue. This consultation builds on our work and should see the number of declined claims fall further.
“We’ve been in long and detailed discussions with medical experts about the causes of most Total Permanent Disability claims. As a result, we are confident that the new set of definitions provide clarity and a better understanding about what makes a valid claim.
“We are hoping to spark interest and get a good cross-section of consultation responses. It is vital that consumers, insurers and other interested parties make their voices heard.”
Bernie Hickman, Managing Director of Protection at Legal & General and chairman of the ABI’s Protection Development Committee, which is responsible for regularly reviewing the Statement of Best Practice for Critical Illness Cover, said:
“The insurance industry is taking a proactive approach to address areas of potential consumer detriment and enhance the reputation of our products.
“Research and day-to-day claims handling experience has demonstrated that too often, customers don’t understand what ‘total’ or ‘permanent’ means in the context of disability. This means that they claim for Total Permanent Disability but end up disappointed when they are declined or payment is deferred. The industry exists to pay claims when they are needed most so we want to do all we can to ensure that customers understand what are they covered for.
“Consumer research also highlights confusion between income protection and critical illness insurance. The proposed changes will make the distinction clearer, and everyone in the industry should agree is a good thing. I hope this means customers will have a better understanding of critical illness insurance and leads to even fewer declined claims.”
