Providing clear and concise critical illness definitions whilst giving broad coverage is something that the industry as a whole has not been particularly good at. But before we beat insurers up too much, we must understand that it is also not easy. Make definitions too simplistic and you run the risk of opening up claims for conditions that have no impact on a client’s life. Alternatively, you could close off opportunities for clients to claim for conditions which are severe. The good news is that much has, and is, being done to provide more clarity in definitions and the industry is moving forward. Today Scottish Widows have launched their latest critical illness update that promises much more clarity and simplicity of wordings, but does it live up to the promises?
In February last year, Scottish Widows launched their radical new policy “Plan & Protect” within their banking branches. It introduced far fewer definitions which covered a wide range of conditions and a new way of visualising critical illness with its body cover image. Whilst the cover provided by the policy itself was not comprehensive (compared to the top advised critical illness policies), we loved the use of imagery to help consumers better understand what they were covered for.
Today’s upgrade introduces the same imagery to their advised critical illness plan. The image categorises the conditions covered into five areas of the body making it far easier for advisers and clients to understand what is covered.
The imagery used, however is not the only thing that is impressive about the changes. In a move to simplify the policy, Scottish Widows have amalgamated a number of conditions whilst at the same time broadening the cover they offer as can be seen below:
- Heart and Vascular Surgeries of major severity: Six definitions (aorta graft surgery, cardiac arrest, coronary artery by-Pass grafts, heart valve replacement or repair, pulmonary artery graft surgery and structural heart surgery) have been combined to form one clear definition that will pay if the client undergoes any of these surgeries on the advice of a consultant cardiologist.
- Heart and Vascular Surgeries of specified severity – This is an additional payment definition and therefore does not pay the full sum assured at claim, and amalgamates coronary angioplasty, endovascular repair of the thoracic or abdominal aorta, pacemaker insertion, peripheral vascular disease and endarterectomy or therapeutic angioplasty.
- Benign Tumour of Brain or Spinal Cord – Benign brain tumour and benign spinal cord tumour have been amalgamated into one definition.
- Stroke of Brain or Spinal Stroke – Stroke and spinal stroke have been combined to form one definition
- Neurological Deficit caused by specified condition – This combines their bacterial meningitis, Creutzfeldt-Jakob Disease (CJD), encephalitis and Devic’s disease definitions into one.
- Cerebral or Spinal Aneurysm or Arteriovenous Malformation – The combination of cerebral aneurysm and cerebral arteriovenous malformation into one definition.
Alongside these changes, Scottish Widows have added coverage for central retinal artery occlusion, infective bacterial endocarditis, neuroendocrine (NET) or gastrointestinal stromal tumour (GIST) of low malignant potential. The end result is that the policy now offers 30 main definitions and ten additional payment definitions, compared to 41 and eight respectively in the old policy. What is particularly impressive is the plan is clearer and far more comprehensive as our panel of doctors explain:
“A lot of thought has clearly gone into the format of this policy to allow greater understanding to the lay-person. This has been done through organising wordings into body systems with the addition of a graphical representation. Scottish Widows appear to have found the right balance of combining and simplifying wordings, without losing either coverage or clarity, which is impressive.”
Such changes have revitalised what was becoming a tired policy and brought Scottish Widows back into the critical illness market, not only as a comprehensive policy but also one that is easier to explain to clients.
The graphs below highlight who is most likely to pay a claim based on our independent medical panel’s assessment of insurers definitions combined with age-banded incidence data. The age-banded incidence data along with the gender, age and term of the plan enables us to weight each condition based on how likely someone is to suffer from it. Therefore, those conditions that a consumer is more likely to suffer from have a far greater impact on the overall score than conditions that are rarer.
The following example is based on a 35-year old male taking out a 25-year policy:
The following example is based on a 35-year old female taking out a 25-year policy:
Outside of the changes to definitions, Scottish Widows have also made a number of other changes. The amount they will pay for additional conditions has been increased from 25% of the sum assured to a maximum of £25,000, to 25% of the sum assured to a maximum of £30,000. Whilst the monetary increase is positive this is less than some other insurers, namely AIG (50% of the sum assured to £35,000), Aviva (100% of the sum assured to a maximum of £25,000), Guardian (25% of the sum assured to a maximum of £50,000), LV= (50% of the sum assured to £30,000) and Legal & General pay under their CIx proposition (50% of the sum assured to £30,000). In comparison to these insurers it will depend on the sum assured at the point of claim as to who is likely to pay the most, however it is certainly an improvement on the standard 25% of the sum assured to £25,000 basis previously in place as the graph below demonstrates.
Under the new terms the children of the life assured will be covered for all the main and additional conditions (plus five child specific conditions) except total and permanent disability. A particularly nice change is the removal of the requirement for a child to be financially dependent if the life assured is their legal guardian which will remove unnecessary complications at claim.
The amount that will be paid if a client claims for a child critical illness has also increased from 50% of the sum assured to a maximum of £25,000, to 50% of the sum assured to a maximum of £30,000. Again, whilst this is a positive move, it is still behind the likes of AIG (50% of the sum assured to a maximum of £35,000) and Guardian (25% of the sum assured to a maximum of £50,000) depending on the sum assured.
In another change for children’s cover, Scottish Widows have increased the amount they will pay on the death of an eligible child from £5,000 to £10,000. Across the market this is the highest amount that an insurer will pay for child death benefits as shown below.
Overall all the changes made by Scottish Widows are extremely positive. We are particularly impressed by the way they have managed to consolidate conditions into categories to provide a far clearer picture of what is actually covered whilst increasing the breadth of cover at the same time. They are clearly not playing the numbers game with regard to the amount of conditions covered and have set the bar for other insurers to aspire to in terms of simple, clear and concise wordings. It provides a clear message to advisers that compare critical illness policies based on the number of conditions that this is a flawed comparison.