If you are as old as I then you would be thinking – the heading should read ‘when the going gets tough, the tough get going’, a popular 80’s classic by Billy Ocean. The 80’s were my favourite music era, although as I reach another milestone age, I am more concerned I have plenty of support in case, one day, the going does indeed get tough.
Being diagnosed with a critical illness falls into the tough category. Faced with an illness that takes you away from your normal routine and changes your focus to a fight to hold onto everything you took for granted, is my definition of tough.
No one wants a critical illness, and there are plenty of reports about increasing rates of diagnosis of critical illnesses, like cancer, heart attacks and strokes. However, advances in medical science mean that for those suffering a critical illness event, there is a much better chance of survival, so it’s not all doom and gloom.
If a critical illness event occurs and the individual survives, the next biggest issue is dealing with the aftermath. If rehabilitation is required, this can take months and may require a degree of lifestyle modification.
What can help, other than the support of family and friends, is employment related support, in the form of critical illness cover, which provides a tax-free lump sum payment directly to the insured in the event of an eligible claim. Such a payment can help the individual focus on their recovery and not worry about their financial commitments. A lump sum payment could help to finance modifications required at home or be used to support lifestyle changes.
Most group critical illness policies include complementary child cover at 25% of the rate provided to the insured and possibly wellbeing support for the claimant to help them better understand their condition and consequences of their diagnosis.
Each year, group risk reinsurer Swiss Re produces a summary of group risk market performance from all insurers, for each product. The critical illness performance for 2016 – 2017 shows that:
• insured benefits increased by 7.9%, equivalent to an increase of £2.7 billion,
• annual premium payments increased by 7.4%, equivalent to an increase of £7.1 million,
• policies in force increased by 11.1%, equivalent to an increase of 3,679 policies, and
• 64.3% of premiums paid are to critical illness policies provided via a flexible benefit or voluntary arrangement.
Although group critical illness is relatively new, this growth shows the value is recognised by both employers and employees.
The attraction of providing cover under a flexible benefit arrangement is so employees can select the preferred level of cover within a pre-defined range. This is important because one of the key differences between a critical illness policy purchased by an individual and that purchased by an employer is the underwriting method.
Individual policies are underwritten prior to cover being formally confirmed, so any limitations are explicit at commencement. Under a group policy, a pre-existing condition exclusion (PECE) is applied, so any insurable critical illness event, or related event that the employee had previously is not covered by the insurer to prevent policies being taken out when claims are likely.
Underwriting is not required because of the PECE, as in the event of a claim, the employee’s medical history is reviewed to ensure the employee has not previously been diagnosed with the condition, or a condition related to that being assessed. Where critical illness cover is provided on a group basis it is essential that the PECE is communicated so that the provision of cover is clear.
Whilst this may appear to be an unusual approach, it works. Those with health conditions might be underwritten under an individual policy and face loaded premiums or a declination. Receiving a declination causes issues with future insurance applications, as the declination must be disclosed. Under a group arrangement, although existing medical conditions may not be covered, a range of others will without the inconvenience of underwriting, restrictions to cover or premium loadings.
Offering a flexible benefits package allows individuals to consider their medical history and decide if they want to proceed, along with the means to secure cover in a quick and convenient manner.
It’s fair to say that critical illness cover is unlikely to be at the top of anyone’s ‘to do’ list if they are too young to know Billy Ocean, but it really should be as health conditions generally increase as we age.
Pauline Iles, Principal Risk Benefit Consultant at Quantum