As an adviser who has the benefit of being an ex compliance officer responsible for around 90 advisers I would say Nic makes a very valid point that the sales of PHI are remarkably low compared to the (previous?) levels of CI sales.

This doesn't mean that the CI advice is wrong, but when you look at the overall %ages it does make you wonder if the advice could be 'more right'.

A possible solution to the non disclosure argument is to use an insurance company (or master broker) that uses telephone underwriting.

Another thought is that the Pru have a 'serious illness' policy that has a much longer list of illnesses (up to 153) instead of the standard 35 or so. It also pays out on severity, so you don't get an all or nothing view, you could get a 50% payout or 25% payout for instance.

Illness cover is moving on and improving 

 

I've just been set an email with this thread, months after I posted. My attention was being drawn to Brian's final comment. Brian, I think you need to re-read what I wrote: I was not (necessarily) having a go at IFAs but at life offices. As I pointed out, IFAs are often "upset and embarassed" on behalf of their clients. That said, if a CI policy is sold by an IFA and he or she fails to ask the right questions of the client beforehand, such that a claim is then refused by the insurer, that adviser is seriously at fault.

Nic

I think that your last comment is particularly unhelpful and only seeks to hinder financial advisers looking to ensure their clients are adequately and suitably covered based on the client's attitude to risk, whether its mortgages, pensions or protection or any other area.  Undoubtedly there are advisers out there who "go after the sale", but its a bit like lumping you as a moneysupermarket journalist in the same boat as one of your esteemed colleagues from the Sun.

As professional financial and mortgage advisers, we go to great lengths to ensure that we give the very best advice, even if that means telling a client that we can't help them.  We do our research using the latest systems, we provide written records of our discussions and explain why we've made certain recommendations based onour clients' priorities, and we ensure we stay up to date with professional development.  Our files are regularly checked by our network compliance officers to double and triple check the advice we give is suitable, sufficient and adequate.

You can see why your comment is bang out of order. 

Brian

backfoot:

Also the report states that CIC should be considered in the context of a wider assessment of of a person's financial planning needs.

And that's another thing: there are other policies on the market, such as permanent health insurance, or PHI, that most advisers would argue are better all-round products than CI cover in that they pay a guaranteed income to someone in the event of them being unable to work.

Yet until recently, CI insurance vastly outsold PHI. Why? Because it was/is easier to sell CI compared to PHI. In other words, never mind the need, think about the commission.

I should add that, in reply to your point about what an insurer might or might not do in the event of disclosure, it is quite clear that if disclosure of GP visits is given, the insurer has the right to exclude that condition and related ones from its cover. That's fair enough, in my book.

But what some insurers do instead is use ANY case of non-disclosure, even if totally irrelevant to the subsequent diagnosis of a critical illness, as an excuse not to pay out.

So I might go to my GP and ask for treatment for an ingrown toenail. Five years later I have a stroke and the insurer declines my claim on the grounds of non-disclosure. Totally insane. Can't possibly happen? See my examples above. No wonder people are cynical about the industry.

Just read the FSA's press release dated 30 th May 2006. whilst it is not as entirely damning as previous findings it doesn't present the rose tinted view that is offerred here.

The key aspects for anyone considering a policy is to ensure you know the full extent of the cover provided and weigh that up against the price charged.

The trouble with this sort of policy is that the title itself lends itself to the belief that it is all encomapssing.The reality is that the cover can be quite limited when you read the small print.Regretably,even the savvy don't actually do this once they are persuaded by the salesman it is a good idea.Also the report states that CIC should be considered in the context of a wider assessment of of a person's financial planning needs.

I still think its an avoid.

As I have said more than once, I have nothing against the concept of insuring against critical illness.

I also understand the requirement for utmost good faith when signing an insurance contract. The questions you need to address are why it is that:

1) If it is all the policyholders' fault, the regulator and the ABI have felt the need to become involved in ensuring that insurers are not unfairly denying claims.

2) The Financial Ombudsman Service has repeatedly upheld complaints against insurers over issues of non-disclosure.

For example, like the policyholder who was diagnosed with breast cancer but was turned down because she received treatment for back pain more than five years earlier following the birth of a child. Back pain that was treated and for which she had never needed to take a day off work between then and her subsequent diagnosis of breast cancer.

Or the insurer who turned down a CI claim for a woman who was diagnosed with leukaemia (and subsequently from it died) - on the grounds that she had received treatment for ear infections years earlier and wore a hearing aid. The FOS website has plenty of similar examples. Check it out.

3) And why it is that many of the comments I am making are also voiced by people within the financial services industry itself, not just mouthy journalists like myself.

If they had been fair there wouldn't be anything to write about !! Why should I disregard the evidence?

You're right, there are cases on TV and in newspapers where insurers haven't paid out. How do you know that this is full picture though? Too much weight is given to these cases because they make better headlines.

The insurance policy is there to pay out in the event of an insurable event.We should expect them to do that not applaud them.

As Nic says there have been voluminous documented cases where insurers have blatantly tried to avoid paying out through trivial excuses.others where they have argued the toss about fitness to work where someone has been blatantly incappacitated.I watched a Watchdog report on this and it was shameful.

I personally wouldn't pay for such a policy,given the track record.

You are glossing over the fact that these "long-forgotten visits to a GP for unrelated problems" will have had a bearing on whether or not someone would be accepted for cover in the first place. Therefore if you 'forget' to mention something that you feel is not relevant or significant, then you may be enjoying cover that you would not otherwise have had.

It's the same for motor insurance - if you have a previous poor driving record then you are judged to be a higher risk individual and you may have to pay more or even be refused cover. If the insurer does not know about this record then it cannot assess the full risk.

I think you will find from the many newspaper stories on this subject that people fill out the forms a) on the basis of advice from their advisers and b) as accurately as they know how. What then happens is that many insurance companies use every trick in the book to avoid paying out, using long-forgotten visits to a GP for wholly unrelated problems as an excuse. Or delving through the smallprint to deny a claim. Then, when a newspaper calls them, they cough up. How ridiculous is that?

Don't take my word for it: ask yourself why it is that the FSA has needed to get involved. And why it is that in many cases it is the IFAs themselves who get upset and embarassed by an insurer's attempt to refuse payment to their clients. If they don't understand what is going on, who is supposed to?

It seems to me that it is a perfectly valid product and that if people simply fill out the forms accurately and truthfully, there wouldn't be a problem. A lot is made of declined claims but these are very much the exception rather than the norm.

Hi there. A good friend of mine also had a payout on CI after a heart attack a year or so ago. So Itend to agree with you.

The problem, however is not with the concept of CI but with the fact that a) many insurers appear to be using the smallprint in their policies to deny people payouts, sometimes in a very nasty way. This has even led to an FSA investigation and a commitment by insurers to improve things. Things do seem to be getting better, although it's early days yet.

This leads to b) the fact that many advisers who recommend the cover don't do enough to ensure that policyholders understand the requirement of "utmost good faith" and the need to inform the insurer of all pre-existing conditions, hence the high refusal rate on claims.

Finally, c) many insurers have uprated their cover but existing policyholders have not had their policies uprated. This means that when they claim using the new terms, they are turned down. They think that's unfair and I agree with them.

I should add that CI policies have got a lot more expensive in the past few years, which is one reason why take-up of CI cover has fallen from 1.2 million policies sold about 5 years ago to barely 600,000 today.

Why are there not more good news stories on critical illness cover? A close family member of mine had a stroke a few years ago and he got a payout from his critical illness policy which has helped him live a relatively normal life.

People shouldn't be put off taking out protection insurance because of scare stories.