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Critical Illness from Legal & General


Pros

Cons
More conditions covered.CI remains a complex product for clients and advisers alike.
Simplification wherever possible.Switching between Core and Extra cover plans later is not as easy as it might be.
83% of L&G’s underwriting decisions are now made at point of sale.A poor adviser can no longer compare CI plans just by counting up how many separate conditions it lists.

The Product

L&G has introduced a number of changes to its two option level critical illness (CI) plans, looking both to widen cover and to simplify where possible.

Among the changes are:

  • Additional payments under the CI Extra plan are now the lower of £30K and 50% of the sum insured (up from 25%).
  • Coronary artery by-pass grafts (CABGs) and open heart surgery have been combined under a single heading of specified heart surgery.
  • Necrotising fasciitis, primary sclerosing cholangitis and total colectomy have been added on CI Extra plans.
  • On all plans, the loss of use of hand or foot, major organ transplant and motor neurone disease definitions have been improved.
  • On CI Extra plans, the benign spinal cord tumour and brain damage due to a hypoxia/anoxia definitions have been improved.
  •  On CI Extra plans, new additional payment conditions have been added – coronary angioplasty and craniotomy for brain abscess – while the drug resistant epilepsy definition has been improved.
  • Children’s cover now includes all adult conditions.
  • A number of conditions have been rationalised or simplified.
  • Instead of listing each in situ cancer covered, a generic ‘other cancers in situ or neuroendocrine tumours of low malignant potential’ definition has been introduced, although eight such cancers have more specific definitions too.

What they say

Intermediary director Craig Brown said: “These latest changes improve the level of cover we offer to customers, but also reduce the complexity of critical illness products. We think that will make it easier for advisers to have those important protection conversations and explain these products to clients, whilst also giving consumers much more certainty over the support they have if and when they need it.”

What we say

This lot adds up to a significant number of changes, but also a change of direction, embracing greater simplicity.

Fundamentally, the changes are good news for clients – but also for advisers.

Changing even a single definition to simplify it runs risks for insurers and medical advisers, underwriters and actuaries are all too aware of this. But L&G has gone a lot further and a considerable amount of work looks to have been undertaken to achieve the changes made. New conditions have been added, but others have been amalgamated, some widened and many definitions have been improved too. Put simply, more CI claims per 1,000 customers will be paid out, but explaining what the plan covers will generally be simpler for advisers.

That said, all CI plans remain complex and working out which combination of benefits is most likely to suit any particular client now needs detailed analysis, which some specialists can now provide.

Strategically across the CI market we can begin to see certain CI trends firming up and it is appropriate that the UK’s largest life insurer is at the forefront of many of the changes:

  1. A general simplifying of definitions.
  2. Amalgamating conditions where possible.
  3. Avoiding unnecessary conditions (those you really can’t claim on), exclusions and claim barriers.
  4. Still widening cover.
  5. Offering a choice of wide and narrow cover plans.

Only the last of these is one where I have serious reservations. The appeal is clear (simpler to explain and understand; easier and faster underwriting and lower cost) but the danger is clients buying on price, only to find they can’t claim on what, to them, is a critical illness, but was only covered on the more expensive plan – which they don’t have. Manna for claims management companies?

One way to minimise the risk might be to sell the simple plan first, but then actively encourage clients to switch to the more comprehensive plan. That would require a different approach and more effective upselling than our industry is known for (oh and a whole bunch of technical issues to resolve en route too) but such a solution would go a long way to making CI an even more attractive proposition to as many clients – and advisers – as possible.