Life Insurance Could Target Individual Illnesses

21.04.2006 Critical Illness Cover (CIC) insurance policies pay a lump sum of money to holders who are diagnosed with a life-threatening condition. But over the past couple of years, premiums for this kind of insurance have soared. This is because medical advances have meant that illnesses once considered critical, no longer are so. Sophisticated detecting equipment and advanced treatments have meant that many conditions which would have killed in the past, are now being survived. As a result more people have been claiming for conditions which turned out not to be life threatening. The result has led to premiums going up by about 70 per cent in recent years.

According to Kevin Carr at Life Search, a broker: “many of the conditions currently covered by critical-illness policies are becoming quicker and easier to detect and treat. . . Hence insurers have found themselves paying out on claims where the condition was not life- threatening, which is not the purpose of the policy.”
The Association of British Insurers (ABI) has been looking at ways to reduce the rising insurance premiums. They have already revised the  terms for which cover is given to victims of heart problems and prostate cancer and are looking into further ways to alter policies so that the advances in medicine will be taken into consideration.
One suggestion is that CIC insurance target individual or groups of critical illnesses rather than vast numbers of illnesses, some of which could be very unlikely to occur. By providing cover for individual illnesses, premiums could be greatly reduced. For example a policy holder insuring themself against cancer only, rather than full scale CIC packages, could find themselves paying much lower premiums
Such tailor-made packages are yet to come onto the market, although some insurers do offer different levels of CIC. Unum Provident, a disability insurer, offers a product called Elixia 123, which divides illnesses into three categories: life-threatening, disabling and traumatic. Individuals can then choose what level of cover they want. If insurance covering individual illnesses becomes available there could be a problem selling it. Insurance advisers would have a hard time deciding what product to recommend to a customer, without being able to predict their health changes twenty years down the line. If an adviser recommended a minimum coverage package to a customer who developed an illness which didn’t fall into this category, they could find themself facing a mis-selling claim.