Friends Life Group Cancer Cover
We reviewed this as a Capita product last month, but it is now available through other advisers too and we now have full information about the plan as well.
The plan is the first employer funded cancer-specific workplace benefit in the UK. It has a fixed sum insured of £25,000 per employee and pays out on diagnosis of a cancer as defined in the terms and conditions.
That definition of cancer is based on the ABI model definition as used in critical illness insurance. This means it excludes cancers in situ, less advanced cases and non-malignant tumours but that it does include leukaemia. On diagnosis, the customer must survive for at least 14 days for the cash lump sum benefit to be paid out. Claims must be notified within three months of diagnosis. All pre-existing conditions are excluded. Cover can last up to the scheme expiry age.
The policy also provides access to a Cancer Support Service provided by Working Towards Wellbeing (W2W), to Best Doctors and to the Bupa HealthLine.
Premiums are subject to review after the initial premium guarantee period, which is usually two years. Friends Life can change the policy terms and conditions at any time after five years. Premiums are calculated after three months, in order to allow membership to stabilise, and future premiums will also depend on claims experience.
Employers can usually claim premiums as a trading expense, when benefits will be paid tax-free to the individual employee (member). Commission is usually 12% of premiums paid.
Comment: Cancer-only cover predates critical illness insurance and has been popular in some territories for decades. However, it has never taken off in the UK (and the birth of CI cover introduced a much wider benefit anyway) but offering it in the group market is unique.
That begs the question of why an employer would choose this plan, when CI cover is already available and that cancer makes up only around 70% of CI claims. But a case can be made to go cancer-only and part of that is down to the cost and simplicity of such an approach. In addition, some employers who like the idea of group CI may not be able to afford it. This offers a cheaper alternative. The plan may also appeal to firms who choose not to have cancer cover under their group PMI scheme but still want to provide a cancer benefit to their employees. The NHS has significantly improved its cancer care in recent years, and can now be the preferred choice for cancer care for many people. If it is, having £25K to spend however you wish may appeal to some employees rather more than would having private care and no cash.
One question is whether ‘cancer only’ is really the best solution. For example, an insurer could provide an additional or partial benefit for less serious cancers. Cover could usefully extend to conditions such as benign brain tumours too, as these can have similar medical and financial consequences to having a malignant tumour. Back in the 1980s, it’s interesting to note that fledgling CI insurers quickly became aware of this dilemma and resolved it by adding benign brain tumours to their CI cover.
Such changes can quickly create problems of their own however on this type of plan. More and wider cover invariably increases cost and, just as importantly, can mean having to ramp up the underwriting hurdles in order to avoid anti-selection.
We expect though that if this type of cover does take off, different insurers may well tweak exactly what conditions they cover under their plan.
The bottom line is forget any prejudices you may have against limited cover plans, and look instead at this plan for how it might be able to best meet an employer’s needs. You just might be surprised.
Plus points: A simple product that does exactly what it says; Sustainable and affordable; Cancer remains a key health worry for many people; Most people now survive cancer so the need for survival cash is high; The benefit level is set so as to be attractive without resulting in too onerous underwriting obstacles .
Not so plus points: Only covers cancer and does not cover other life threatening conditions or similar conditions such as benign brain tumours; £25K may not be enough for some cancer treatments (nor would ten times that figure); Employees may not understand the plan’s limitations compared to a full cost CI or PMI solution.
Website: http://www.friendslife.co.uk.
Rating (max 10): Innovation: 7. Overall: 7. Silver
Tags: Friends Life; Other