Critical illness update sells seriously ill claimants short

Thousands of policyholders paying out premiums to cover critical illness could be sold short by new industry guidelines.

Critical illness cover has a poor reputation for pay outs due to poorly written terms and conditions that are blamed for letting insurers off the hook when someone makes a claim.

Many policyholders who have paid for the special cover in the event of a heart attack or serious illness like cancer, only to find they receive nothing unless they have ‘the right sort’ of cancer.

The exclusions let insurers avoid meeting many claims, but following protests from lobby groups and customers, the Association of British Insurers has issued new guidelines aimed at improving the product.

The problem is the new guidelines are not retrospective and do not start to the end of next year – although insurers can introduce the measures earlier if they wish.

This means anyone with an existing policy or starting on in the next few months loses out.

ABI director of health and protection Nick Kirwan said: “Our new guidelines are designed to ensure that policies pay out when people expect them to.”

The main issue with critical illness insurance for policyholders is the way insurers dissect medical evidence that often looks to the claimant that the insurer is looking for ways not to pay.

This can make a difficult personal time even tougher for someone undergoing treatment for a serious illness. The guidelines should, says the ABI, improve the clarity and understanding of the total permanent disability cover.

“While these claims represent 3% of all critical illness claims, a high proportion have been declined. It is hoped that the new statement will have an impact in further reducing unsuccessful claims,” say the guidelines.

Other updates include changes in wording to the terminal Illness definition in the light of changing medical science, and clarity improvements to the cancer and Parkinson’s disease definitions. Another change is the standardisation of pre-existing policy conditions for children’s critical illness cover.