Florence Nightingale’s dictum was that the first requirement of a hospital was “that it should do the sick no harm”. In the nineteenth century all surgery was highly lethal and a stay in hospital frequently meant death.
Thankfully, times have changed. Many so-called “dread diseases” can now be detected even before the onset of symptoms. Today’s critical illness policies, which provide a lump sum on diagnosis of certain illnesses, need ongoing surgery to keep up with the latest advances in healthcare.
Luckily the ABI’s critical illness working party has got the matter firmly in hand. At the time of writing, the board of the ABI was due to give its seal of approval to the revised Statement of best practice for critical illness cover. This document will replace the previous statement of best practice, which was published in April 1999.
The revised statement is expected to include a number of major changes – the most significant being new model definitions for cancer and heart attack and alterations to the way that critical illness cover is described in key features documents. Insurers are expected to have to adopt the changes no later than the end of May 2003.
It was deemed necessary to make the alterations to critical illness policy definitions following two major advances in the medical profession. For example, as part of its prostate cancer management programme, the Government plans to develop the tests and treatments that will make it possible to introduce a national prostate cancer screening programme for all men aged over 50.
At present, all forms of prostate cancer are covered by critical illness policies. “Prostate cancer is normally only detected when clinical symptoms appear, when it is beyond the first stage,” says Nick Kirwan, chairman of the ABI’s critical illness working party.
Kirwan says that screening can now detect prostate cancer before symptoms appear, when the condition is highly treatable and the diagnosis is unlikely to “significantly change” the policyholder’s lifestyle – the reason that a critical illness lump sum is issued. In many of these cases, the recommended treatment will be “watchful waiting”.
“If there are more detected cases there will obviously be more claims,” says Kirwan. If screening detected every case of prostate cancer, premiums for men would increase, in some cases by up to 40%, he adds.
There were two ways for the industry to go forward; leave the definition for cancer unchanged and allow premiums to increase, or amend the wording for cancer cover to allow insurers to decide whether to cover all prostate cancers or only the more advanced cases.
Rather than make formal recommendations, the ABI’s critical illness working party put out a consultation paper in April 2001 to all members issuing life insurance, as well as to the Office of Fair Trading, the Consumers’ Association, the medical profession and the Association of Independent Financial Advisers (AIFA).
The vast majority of respondents to the consultation felt that the model definition should be changed. Kirwan adds: “It is important to point out that the working party doesn’t own the decisions – it is just a facilitator in the industry. We are pleased that the consultation process was so widely participated in and hope that the new statement will stand the industry in good stead going forward.”
Gleason scores and TNM classifications The final cancer definition, to be included in the revised Statement of best practice, is detailed in Box 1, inset. The definition mentions the Gleason grading system and the TNM system (tumour, nodes, metastases) – these are measures used by the medical profession to classify prostate cancers.
The Gleason system reflects how aggressive the tumour is by measuring the extent of the breakdown of the cell structure. While the TNM classification system measures how far the cancer has progressed and where it lies in relation to the prostate gland. To use an analogy of making a journey in a car, one measure tells you where the car is (the TNM system), the other tells you how fast it is going (the Gleason system).
Prescription for change Another major industry concern that has been tackled by the working party is that premiums could also be driven up as a result of an increasingly common test used on suspected heart attack victims.
Doctors have found that a biochemical marker called troponin is present in the blood stream when a heart attack has taken place. Many hospitals are beginning to test for its presence when suspected heart attack victims are brought in and making their decision on whether or not to admit a patient on that basis.
Accordingly, the new heart attack definition will accept troponin as part of the evidence needed to support a claim. However, evidence of troponin alone is not conclusive that the person has suffered a heart attack as the same chemical can be released with conditions such as angina and acute coronary syndrome. In response to this, the revised statement includes a clause to the definition, excluding such conditions. Box 2, inset, shows the finalised wording of the new heart attack definition.
The revised statement of best practice also includes a number of changes to Key Features in a response to the Office of Fair Trading’s concern that insurance products such as critical illness are notoriously difficult to compare. The wordings for the key features have all passed through Plain English checks. It is worth noting that the changes to the cancer definition cannot normally be changed for policies already in force and insurers are only obliged to use the new heart attack definition for new policies.
Perfect time to buy When the ABI working party released last year’s consultation paper, a number of intermediaries predicted a surge in critical illness business before any changes to definitions were put in place. As mentioned previously, insurers must comply with the revised definitions no later than the end of May 2003 so, in theory, it may still be possible to take out a critical illness plan under the current definitions. Indeed, some intermediaries are recommending that their clients do just that.
Anyone buying now should bear in mind that they have a choice of buying either policies with a guaranteed rate throughout the term or those which reserve the right to readjust premiums at five or 10 yearly intervals to take account of the insurer’s overall claims experience. The reviewable polices cost less initially but there is a danger that they could become prohibitively expensive. Insurers will be forced to honour their existing definitions but may have to impose premium hikes if new diagnostic techniques swell claims.
There is an argument for paying extra at the outset in order to guarantee the level of premiums. Other factors to be considered include whether to arrange cover so that it keeps pace with inflation, and whether to take it as an add-on to a life insurance policy, or as a separate policy.
But most intermediaries would agree that critical illness cover should never be bought on price alone. Insurers can differ markedly in the number of illnesses that they cover, how they interpret their definitions at the claims stage and the premiums that they quote for different medical histories.
The future If the current legislation had not been revised, a lot of life offices would have faced enormous potential critical illness claims liabilities in the future. Providers no longer see critical illness as the potential cash cow that it was. But its place in the market is guaranteed. The consumers want it at the moment but if it becomes expensive it could be discarded. This is the main reason that the critical illness working party aims to continue to revise its standard terminology, restrictions and charges, every three years.