Andrew Wibberley from Alea Risk has a different view on retrospection. Invoking some 1980s computer nostalgia, his view is thought-provoking and we'd love to hear your thoughts on them.
As a child, I was lucky enough to get three computers for the price of one. Our Spectrum 16k broke after they’d stopped production, and so we got a machine three times more powerful – the almighty 48k as compensation. We couldn’t believe our luck when the tape player on that broke and got us a free upgrade to the almighty ZX Spectrum 128k.
We felt lucky to have this continual upgrading – but for many commentators, this good fortune is their demand from Critical Illness products. Whether a policy was sold when I was hammering those z and x keys on Daley Thompson’s Decathlon back in the 80s or last week some argue that the definitions should be levelled up to the broadest possible definitions for the customer.
How should we handle the different versions of products that are owned by different customers? Is it unfair for someone who bought a CI product in 2009 to have a claim turned down because it doesn’t meet the definitions on their policy when it would have met the definition on a policy sold by the same insurer today?
We need every customer to have certainty in the cover have and confidence that it will pay when it says it will. I don’t think it is relevant what their insurer has done since – what is important is that they understand what they as an individual have. If I bought a Playstation 3 I’d just want it to work - I wouldn’t expect to be sent a Playstation 4 for free (or at a “top-up” price).
Ultimately if an insurer is able to offer to upgrade existing policies to new definitions without charge they are either:
- adding or changing definitions that do not have a material impact, or
- making too much money from the original product they sold, or
- putting their future ability to pay all claims at risk
When designing new propositions there is a valid conversation to be had, and many will be watching Guardian’s work with interest in this regard. I think it’s good that someone is offering this distinctive product that some journalists and advisers have asked for.
I still have reservations about this given uncertainty over where the CI market will head or how active Guardian will be in it over the next two or three decades. With this in mind, it is impossible to explain how advantageous this benefit will be in practice for any individual.
If the market continues to play with definitions as it has then there will be plenty of points at which the insurer will contact the customer. Of all the things that insurers or advisers could be talking about regularly with customers, I really struggle to believe that a slightly changed definition is the most important thing.
A conversation about whether I would want to pay 60p a month more to change definitions x,y and z on my CI policy just seems like an extra decision to worry about to this busy, self-employed, dad of 2 young kids who I just want to play Mariokart with!
The worst-case scenario is that a requirement to keep all CI past and future definitions inline leads to a restriction of innovation or developments in the market.
If a CI definition is considered in five years the risk of which would not have been underwritten today then the guarantee will get really stretched. This could result in the potentially helpful new CI definition for tomorrow’s customers not being offered due to the burden of upgrading today’s customers. Restricting future development in this way does not seem to help either group.
I think it best for us to offer the best definitions we can today and to evolve these in the future as we understand the challenges and medical changes that we do not yet understand. This gives certainty for existing customers, prevents unnecessary disruption to them with typically minor, technical upselling and allows the product to fully flourish in the future.