One controversial aspect of critical illness insurance has been the exact definition of what is ‘critical’, measured by the severity of the symptoms.
Consumers with a critical condition which comes in mild and more severe manifestations can often find themselves at odds with their critical illness insurance provider, over the validity of a claim.
A more flexibile option is ‘severity-related’ critical illness insurance, which offers a partial payout for less severe episodes of critical conditions.
One example is the PruProtect critical illness policy by Prudential.
By linking payouts to the degree of severity of the illness, the PruProtect critical illness policy makes possible an immediate payment for a less severe incidence of a condition, while still leaving cover in place for possible future repeat events.
“A good example is blindness,” said Deepak Jobanputra, actuarial director at Prudential.
“While a customer would have to be totally blind in both eyes for a conventional critical illness policy to pay out, we offer a payout for partial blindness or tunnel vision – which can still have a significant impact on your ability to work, and your lifestyle.”
The amount of a first payout is deducted from the total amount of cover, so that an initial payment of £40,000 on a £100,000 policy would leave a possible £60,000 to cover future eventualities.
This contrasts with conventional critical illness policies, where severity must meet strictly-defined and measurable criteria before the policy will pay. In the case of heart attack, for example, significant changes must register in electrocardiogram (ECG) readings to verify heart damage, in order to justify a full payout.
The logic of severity-based critical illness cover is to improve and widen the parameters of ‘certainty of claim’. This means that clients are better off if they are eligible for a 25% payout for lesser manifestations, when previously there would have been no payout at all.
Although Prudential is the only purveyor of a severity-based critical illness policy at present, the concept of a partial payment for less serious incidences is certainly an idea whose time has come.
In 2009, BUPA Individual Protection launched a product which, although not a severity-based insurance product, also uses the concept of partial payout for the specific conditions of low-grade prostate cancer and mastectomy.
Mastectomy is also included on a partial payout basis in critical illness insurance by Royal Liver.
