AIG Life has updated its existing critical illness plans, with two developments in particular being worthy of note.
First, it has grouped more than 20 conditions under just four broad headings. These focus on specific surgeries or on the impact on daily life for customers, not on the name of the illness. If the impact is the same, the customer will be covered - whatever the name of the condition. The headings are:
Degenerative neurological disorder.
Reduced heart function.
Surgery to the heart, aorta or pulmonary artery.
Surgery via the skull.
Individual definitions remain but AIG says this approach is ‘a step change in CI market simplification, whilst enhancing the prospect of a successful claim’.
Second, it has made children’s cover optional, covering those conditions likely to significantly affect children (rather than using the full adult list), and putting them in two groups. Group 1 pays £50K for conditions having a major impact and group 2 pays £25K for those with a lesser impact. If a group 1 (£25K) payment is made, an additional £25K can be paid for diagnosis of a different group 1 condition.
AIG offers Term Insurance with Critical Illness Choices, to which the customer then can add enhanced cover, which pays on a wider range of conditions, including pregnancy complications. Customers can also add waiver of premium and/or total permanent disability cover, and a range of added-value services is built-in, including Smart Health.
Children's cover can be added or removed at any time and costs just £7.50 a month. It includes £50K of critical illness cover, hospitalisation benefit and cover for birth defects. If the child is unable to receive effective treatment for the condition in the UK and a prescribed treatment is available overseas, the cover amount is doubled.
Looking at cover changes in more detail, some conditions have been rationalised:
Blindness or removal of an eyeball combines both.
As does brain injury with hypoxia/anoxia.
Cancer now includes aplastic anaemia and myeloproliferative disorders.
Degenerative neurological disorder includes dementia, CJD, motor neurone disease, Parkinson's disease, Parkinson plus syndromes and also permanently debilitating conditions such as ataxias, Rett syndrome and Alper's disease.
Loss of use of a limb now includes paralysis of a limb.
Lung disease or removal includes pneumonectomy.
Reduced heart function combines the old cardiomyopathy, heart failure and pulmonary hypertension definitions.
Surgery to heart, aorta or pulmonary artery covers aorta graft, cardiac arrest, coronary artery by-pass graft, heart surgery, heart valve surgery and pulmonary artery surgery.
Surgery via the skull includes cerebral aneurysm, cerebral arteriovenous malformation, craniotomy and surgery for epilepsy.
New conditions added are:
Birth defects. Pays £5K for surgery for cleft palate, cleft lip, or developmental dysplasia of the hip or for club foot treatment using the Ponsetti method.
Bladder removal. Pays the lower of £35K or 100% of the sum insured for cystectomy, or complete removal of the bladder.
Bowel disease. Pays the lower of £35K or 100% of the sum insured if treated by intestinal resection or total colectomy.
Cauda equina. This is a full payment benefit on a definite diagnosis with permanent bladder dysfunction and permanent weakness and loss of sensation in the legs.
Endovascular surgery. Pays the lower of £35K or 100% of the sum insured on repair or replacement of a heart valve or an aneurysm of the thoracic or abdominal aorta.
Loss of use of two limbs. Pays children £50,000 on paralysis of the physical loss of two limbs.
Peripheral vascular disease. A full payment benefit if the customer undergoes by-pass surgery to the arteries of the leg or is included on a UK waiting list.
Pituitary gland tumours. Pays the lower of £35K or 100% of the sum insured if treated by surgical removal or radiotherapy.
Severe Bowel Disease. A full payment benefit after two intestinal resections have been carried out.
The previous HIV and loss of speech conditions have been removed as has craniosynostosis on children’s plans.
Comment: AIG is not the first to look to group conditions into broader groups, but its approach is well thought out and, importantly, covers a range of less common conditions that might have previously slipped through the mass of medicolegal definitions and resulted in no claim. If that happened, the insurer invariably worked on the assumption that if that risk hadn’t been specifically recognised, priced and defined then no payment would be payable. It was all a bit like offering household insurance that didn’t pay any claims that happened within say five minutes of midnight regardless of how few claims that might be.
And we’ve lived with all insurers adopting pretty much that approach since the mid-1980s. At Protection Review we’ve said since we started that CI can and should do better but let CI Expert’s Alan Lakey explain it more fully, with examples: “CIExpert has argued for many years that the current design mitigates against those consumers who suffer disabling neurological conditions which are not specifically named within the policy document. There are numerous rare neurological conditions which fall outside the scope of previous plans such as Rett syndrome, Alper's disease, Hertsmann-Strausler-Scheinker disease, Leigh's disease, monomelic alytrophy, Hallevorden-Spatz disease and adrenoleukodstrophy (Lorenzo's Oil Disease). These are now covered by AIG plus some other conditions which may, but don't always, create permanent deficit. In truth, it's been an outrage that these consumers have been denied a successful claim by rigid plan designs and AIG has taken great strides towards resolving this."
We agree. The AIG approach is perhaps still more a journey than a final destination, but this update represents a very significant step forward.
Splitting out children’s cover is also a positive move in that it removes the cross-subsidy effectively paid for by non-parents.
One minor concern – the Cover Details document, at 52 pages, is still a lengthy and complex document to follow.
Plus points: A new and arguably better approach to CI; Separating out children’s cover avoids non-parents effectively subsidising parents.
Not so plus points: CI is still complex; Some weakening of some cover; Parents effectively pay more for children’s cover.
Rating (max 10): Overall: 9. Platinum
Tags: CI; AIG Life
I Mark: No