In an ideal world, a critical illness plan would provide a payout whenever the client suffers from an injury or illness that has a significant impact on their life. The name of the condition in this case would be inconsequential with a successful claim being based on the impact of the condition. Clearly the current critical illness market is a long way from this, however the announcements from AIG today signal a marked step towards such a plan. The new approach to critical illness from AIG promises a lot but what has changed and what does this mean for potential customers?

Let’s start with the options now available to clients. The new changes have been applied to the YourLife Plan only and as such the CIC start and Key3 products are unchanged. For those selecting YourLife critical illness they now have a number of options as per the below

  • Core or enhanced cover for the life assured
  • To include children’s cover or not

As a result, on quotation portals there will be four different options to select from :

  • AIG YourLife Plan Core CI Cover
  • AIG YourLife Plan Core CI Cover + Child Cover
  • AIG YourLife Plan Enhanced CI Cover
  • AIG YourLife Plan Enhanced CI Cover + Child Cover

This approach is becoming more and more commonplace and provides more competition in both the low cost and comprehensive ends of the market. Whilst other insurers have tended to provide additional core and enhanced children’s cover, AIG are not taking this approach and instead are offering comprehensive children’s cover as standard when this is included within the plan.

Cover for Adults

When it comes to the options for adults, as described above there are two options, core cover and enhanced cover. As is traditional with critical illness the plans the definitions provided are split into two groups

  • Group 1 – Full benefit payment definitions
  • Group 2 – Additional payment definitions
    • Core cover pays 25% of the sum assured up to £25,000
    • Enhanced cover pays 100% of the sum assured up to £35,000

Whilst the core cover will pay less for additional payment conditions than was previous paid on the old plan, the enhanced plan has increased the percentage of the sum assured that will be paid for these conditions from 50% to 100%, which is particularly good news for low sum assured policies and decreasing plans towards the end of policy as can be seen below.

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Perhaps the most significant changes however, are those  AIG have made to their definitions. Where necessary they provide specific wordings for specific conditions and they have also amalgamated certain conditions where this makes sense. This has become pretty common practice in the critical illness market, however what AIG have done differently is to introduce the concept of four impact based definitions that provide coverage for the outcomes of a wide range of conditions as opposed to the actual condition itself. These four definitions cover:

  • Degenerative neurological disorders
  • Reduced heart function
  • Surgery to the heart, aorta or pulmonary artery
  • Surgery via the skull

For the condition counters out there, what this actually does is provide cover for well in excess of 20 conditions that other insurers would list with standalone definitions and as such highlights this flawed  approach. Our panel of doctors were particularly impressed in these wordings for two very important reasons:

“Firstly, this avoids unnecessary overlap of conditions and is a refreshing move away from the “condition race” whereby insurers claim to cover ever increasing numbers of illnesses, despite many being covered in other wordings and providing no additional benefit. This is generally misleading and results in complex policies and confusion amongst advisers and policy holders.

Secondly, it allows the coverage to be broader as it is not focusing on a specific disease. AIG have managed to maintain coverage of all previous conditions covered in today’s market, but would also allow claims for other diseases. The risk with providing specific disease wordings is that rarer conditions, despite causing a similar burden of disease and impact to life, may end up “slipping through the net” and not result in a payment. Insurers in the past, have tried to cover this with “catch all” wordings, such as terminal illness or loss of independence, but these usually cover the end stages of an illness which may result in a sufferer not reaching this point during the lifetime of their policy. AIG’s new grouped wordings, provide an additional safety net and appears a fairer approach to providing cover.”

This new approach not only provides a significant step forward for critical illness wordings but also provides an element of future proofing to the plan as our doctors also explain.

“Advancements and breakthroughs in treatment and management are occurring frequently in modern medicine. This has the potential to quickly change the face of what is considered a critical illness. These safeguards are important to keep this type of insurance viable, as it is not sustainable to make frequent large payments for an illness that has little burden on an individual. An example, in AIG’s policy, is the addition of “expected to progress throughout the life of the person”, in the degenerative neurological disorders. There are already some encouraging treatment advancements in certain genetic neuromuscular disorders, through the use of gene replacement therapy. This could potentially provide a cure or prevent this becoming a progressive illness in years to come.”

Overall the changes made result in far broader coverage than AIG have ever offered before and makes a big impact on their positioning in the critical illness market.

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Children’s cover

The traditional method for children’s critical illness is to cover the child for the same conditions as the life assured (in some cases excluding a few) and adding a number of child-specific definitions. AIG however, have taken an altogether different approach.

Along with being an optional extra, the new AIG children’s cover provides its own set of definitions separate from the adult cover (albeit many of the definitions are still the same). This enables AIG to focus on the wordings that a child will be able to claim on, remove those they are unlikely to claim on and in certain circumstances provide specific definitions for children.

In addition, AIG have also added four conditions that are unique and not found in other critical illness plans as our doctors explain.

Cleft lip and palate (listed as two separate conditions)

“Cleft palate and cleft lip, which is a gap or split in the upper roof of the mouth or lip, present at birth. It affects 150 per 100,000 births in the UK currently. This requires surgery, usually in the first year of life, with difficulties in feeding, hearing, speech and dental problems leading up to this point. The infant usually needs a long term care plan and this can cause immense disruption and distress in this early period of life. AIG cover both cleft lip and cleft palate where there is surgery to repair the defect.”

Congenital Talipes

“A baby is born with their ankles pointing downwards and the feet pointing inwards. If this is not corrected, the soles of the foot will not be able to be placed flat on the ground when they start to walk, causing mobility issues. This is a common problem and affects 1 in 1,000 babies born in the UK. It is treated with the Ponseti Method, which is a combination of manipulation and casting, that is changed on a regular basis to bring the feet back into alignment. AIG will cover all cases where the Ponseti Method is used. This will cover the vast majority of cases, as research has shown that this gives better results than surgery and is the preferred first line treatment method.”

Developmental Dysplasia of the hip

“DDH is a condition where the hip joint does not form properly and the ball part of the thigh bone does not fit correctly into the socket of the pelvis. 1-2 in 1,000 babies have DDH that requires treatment and it is more common in females. AIG, will cover this condition if surgery is performed. The first line treatment is a fabric splint that holds the hips in a stable position, known as a Pavlik Harness, and it needs to be worn constantly for several months. Only if this is ineffective, or if this was discovered after 6 months of age, would surgery be needed. Surgery has been reported as around 25 per 100,000 in females and 5 per 100,000 in males in the first year of life. Incidence rates drop drastically after this and surgery is rarely performed after 4 years of age.”

These conditions add significant benefit to AIG’s congenital condition coverage.

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Let’s be clear, the changes AIG have made will not cover every single condition that would significantly impact a client’s life. The conditions it does not cover however, are likely to be rare and a client would be extremely unfortunate to suffer from one of them. As we have stated in previous reviews, we are not fans of combining cancer and aplastic anaemia into one definition as these are completely different conditions and this could be confusing, however it must be said that AIG do separate these conditions within their naming of the cancer definition.

This aside, the new approach taken by AIG is extremely positive for a critical illness market that has threatened simplification and change, but until now has only tinkered with combining conditions into single definitions. AIG’s impact-based approach is extremely welcome and sets a new marker in what is possible. It completely disproves the somewhat tired thinking that more definitions means broader cover.