Critical illness cover moves to heal the wounds

Unpaid claims have caused sales to slide, so will greater clarity and lower prices restore faith?

No one likes to think about what will happen if they are ever diagnosed with a critical illness - and the financial implications, especially, may well be the last thing on your mind. But if people depend on your income, they could need protecting.

For years, to meet this need, insurers have been selling critical illness (CI) cover to pay out a lump sum if the policyholder is diagnosed with a serious illness such as cancer, a heart attack or stroke.

But according to Swiss Re Term & Health Watch 2006, an annual report on the protection industry, there has been a precipitous fall in sales of CI cover.

This is backed by findings from protection broker Lifesearch, which show that while sales peaked at around 1.2 million in 2002, they are currently around half that level.

One of the emerging reasons for this is a lack of consumer trust in CI cover, which has been sitting uncomfortably in the spotlight over the issue of delayed payouts and rejected claims.

The latest figures suggest one in five claims are declined, mainly because either the specific type of illness isn't covered or the policyholder has failed to disclose an earlier medical problem. That rejection rate has prompted many to question whether CI is a valid product, though Kevin Carr from Lifesearch says any insurance product that pays four in every five claims is "very worthwhile".

Nevertheless, the CI sector is moving to get its house in order. For greater transparency, it has already begun to publish claims data, and the industry is now hoping that a "statement of best practice" will bring a reduction in the amount of declined claims.

This statement is being introduced next month by the Association of British Insurers and must be adopted by all ABI members. Pivotal to this new regime is that there will be 23 medical definitions listed, including three new standard descriptions for Alzheimer's, HIV infection and traumatic head injury. The aim is to improve clarity and understanding for both consumers and advisers.

"The changes will make it easier to compare providers, as standard terminology will be used," says Emma Walker from the price-comparison service Moneysupermarket.com.

"It will be easier for consumers to see what is and isn't included in the definitions - especially in the case of cancer."

The new definitions will also be "future-proofed". In other words, an initial diagnosis from a doctor will not in itself be enough for a policy to keep paying out. The policyholder will have to continue to suffer symptoms associated with the condition.

Mr Carr says that while future-proofing may mean claims for conditions from which you recover, perhaps due to medical advances, will not be paid under new policies, they may still be settled under old ones.

Many insurance brokers hope the changes, combined with lower premiums, will stem the freefall in sales. Falling prices for CI are a relatively new phenomenon. Recent cuts from providers including Friends Provident and Norwich Union have been augmented by some "aggressive rate changes by Bupa", says Ms Walker.

But don't let cheap deals tempt you into rushing for CI cover, as the policies on offer vary hugely. For example, some cover just eight or nine conditions, while others, including Bupa, list almost 40.

You'll also need to decide whether to opt for a "guaranteed" or "reviewable" rate. With the first of these, the price is more expensive at the outset but is fixed for the term. A reviewable deal, on the other hand, may seem cheaper but the price can rise, without limit, during the life of the policy.

Additionally, some CI policies automatically cover your children as a fringe benefit but not all do. Most, but again not all, also include life insurance free of charge, so check this. And if life cover is included, make sure the policy is written "in trust" - usually via a document sent by the provider - to avoid it being included in any calculations of your liability for inheritance tax.

Take particular care when checking the payout rules concerning your employment. Note that some policies pay out only if the illness means you won't be able to do any job, rather than just your own.

As for how much financial cover to go for, protection specialists recommend you aim for the cost of your mortgage, and then add on an income estimate.

Always check whether any cover is provided by your employer, as many offer an element of income protection - a type of insurance that pays out a tax-free replacement income in the event of ill-health.

'We were paying over the odds'

Paul and Suzanne Hesk, both 40, have just bought £120,000 in mortgage protection, life insurance and CI cover from Axa.

The couple have two children - Ashley, 19, and Jordain, 14 - and decided to review their cover when they remortgaged their home.

"I wanted to get some help and advice on protection products as I know you can end up with something you don't need," says Paul. "After speaking to Lifesearch, we realised we were paying over the odds for our cover from Abbey."

By switching to Axa, the couple have been able to save £20 a month. They have also got a more comprehensive policy.

"Our mortgage has a long time to run and we want to know we are covered should the worst happen," Paul adds. "When it came to filling in the paperwork, we were advised to disclose 'anything and everything' in the family's medical history - to avoid any risk of non-disclosure if we need to claim."

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Sport
Mario Balotelli pictured in the win over QPR
footballInternet reacts to miss shocker for Liverpool striker
Voices
Sol Campbell near his home in Chelsea
voices
News
Kimi the fox cub
newsBurberry under fire from animal rights group - and their star, Kimi
Arts and Entertainment
Ella Henderson's first studio album has gone straight to the top of the charts
music
News
<p>Jonathan Ross</p>
<p>Jonathan Ross (or Wossy, as he’s affectionately known) has been on television and radio for an extraordinarily long time, working on a seat in the pantheon of British presenters. Hosting Friday Night with Jonathan Ross for nine years, Ross has been in everything from the video game Fable to Phineas and Ferb. So it’s probably not so surprising that Ross studied at Southampton College of Art (since rebranded Southampton Solent), a university known nowadays for its media production courses.</p>
<p>However, after leaving Solent, Ross studied History at the School of Slavonic and East European Studies, now part of the UCL, a move that was somewhat out of keeping with the rest of his career. Ross was made a fellow of the school in 2006 in recognition of his services to broadcasting.</p>
TV

Rumours that the star wants to move on to pastures new

Life and Style
fashion
News
Paul Nuttall, left, is seen as one of Ukip's key weapons in selling the party to the North of England
i100
Arts and Entertainment
Russell Brand labelled 'left-wing commie scum' by Fox News
TV
Arts and Entertainment
BBC's Antiques Roadshow uncovers a TIE fighter pilot helmet from the 1977 Star Wars film, valuing it at £50,000
TV

TV presenter Fiona Bruce seemed a bit startled by the find during the filming of Antiques Roadshow

News
people

Comedian says he 'never laughed as hard as I have writing with Rik'

Sport
Steven Caulker of QPR scores an own goal during the Barclays Premier League match between Queens Park Rangers and Liverpool
football
Arts and Entertainment
artKaren Wright tours the fair and wishes she had £11m to spare
News
i100
Life and Style
Kirsty Wark and Camila Batmanghelidjh been invited to take part in Women Fashion Power, a new exhibition that celebrates the way women's fashion has changed in relation to their growing power and equality over the past 150 years
fashionKirsty and Camila swap secrets about how to dress for success
Arts and Entertainment
Joy Division photographed around Waterloo Road, Stockport, near Strawberry Studios. The band are Bernard Sumner (guitar and keyboards), Stephen Morris (drums and percussion), Ian Curtis (vocals and occasional guitar), Peter Hook (bass guitar and backing vocals).
booksNew book on Ian Curtis sheds fresh light on the life of the late singer
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Operational Risk Manager - Asset Management

    £60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

    Project Coordinator - 12 month contract

    £27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...

    IT Operations Manager - London - £55,000

    £50000 - £55000 per annum + bonus + benefits: Ashdown Group: IT Relationship M...

    Banking Solicitor NQ+

    Highly Attractive Salary : Austen Lloyd: NOTTINGHAM - BRILLIANT FIRM - You wil...

    Day In a Page

    Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

    'They poured water on, then electrified me...'

    If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
    James Wharton: The former Guard now fighting discrimination against gay soldiers

    The former Guard now fighting discrimination against gay soldiers

    Life after the Army has brought new battles for the LGBT activist James Wharton
    Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

    Panic over Ebola threatens to infect the midterms

    Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
    Premier League coaches join the RSC to swap the tricks of their trades

    Darling, you were fabulous! But offside...

    Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
    How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

    How to dress with authority

    Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
    New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

    New book on Ian Curtis sheds fresh light on the life of the late singer

    'Joy Division were making art... Ian was for real' says author Jon Savage
    Sean Harris: A rare interview with British acting's secret weapon

    Sean Harris: A rare interview with British acting's secret weapon

    The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
    Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

    Tim Minchin interview

    For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
    Boris Johnson's boozing won't win the puritan vote

    Boris's boozing won't win the puritan vote

    Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
    Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

    Tim Wheeler: Alzheimer's, memories and my dad

    Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album
    Hugh Bonneville & Peter James: 'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'

    How We Met: Hugh Bonneville & Peter James

    'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'
    Bill Granger recipes: Our chef's heavenly crab dishes don't need hours of preparation

    Bill Granger's heavenly crab recipes

    Scared off by the strain of shelling a crab? Let a fishmonger do the hard work so you can focus on getting the flavours right
    Radamel Falcao: How faith and love drive the Colombian to glory

    Radamel Falcao: How faith and love drive the Colombian to glory

    After a remarkable conversion from reckless defender to prolific striker, Monaco's ace says he wants to make his loan deal at Old Trafford permanent
    Terry Venables: Premier League managers must not be allowed to dictate who plays and who does not play for England

    Terry Venables column

    Premier League managers must not be allowed to dictate who plays and who does not play for England
    The Inside Word: Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past

    Michael Calvin's Inside Word

    Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past