Royal London Serious Illness benefit
Royal London Serious Illness Benefit
Royal London, the UK’s largest mutual life insurer, has launched a Serious Illness Benefit for its direct to consumer business.
Serious Illness Benefit is an additional option available at extra cost to customers applying for Royal London Life Insurance directly. Dependent on age, the cover provides a lump sum payment of up to £350,000 (lower at higher ages) if the customer is diagnosed with one of six conditions. These are:
- Cancer.
- Heart attack.
- Stroke.
- Multiple Sclerosis.
- Benign brain tumour.
- Dementia.
The policy also includes children’s cover up to £25,000. The policy has a 30 day survival period.
Premiums are guaranteed, and customers receive an immediate decision on acceptance, without the need for medical evidence.
Comment: Royal London says consumer research shows there are many barriers to buying serious or critical illness cover, with the most common reasons being that the product is too complex to understand and too expensive to buy without seeking financial advice. Its Serious Illness Benefit plan is designed to address these concerns with a product that is simple and affordable, Royal London says.
I’m all for that but there is a price for such apparent simplicity. That is that if a customer gets an illness that is just as or even more serious in its financial consequences than one of the six defined conditions, the policy pays out nothing. It’s the life insurance equivalent of motor insurance that does not pay out on accidents on particular types of road.
In other words, the insurer is passing the risk of not paying out on a life changing health event from itself to the customer. That’s not too much of an issue if the customer fully understands the risks and accepts this element of self-insurance. But research tells us that customers just want a simple and affordable solution and don’t read the ‘smallprint’. Moreover, of all possible life changing conditions, what proportion do these six represent – 10%?, 90%, more?, less? We’re not told.
To be fair to Royal London, its website goes to great lengths to get customers to understand exactly what the plan does and doesn’t cover and a number of other insurers would be well advised to view this to see how it should be done. But the fact remains that customers are not buying from a position of great knowledge – they are buying (in this case direct) from an expert (the insurer) and have to make value judgements based on insufficient information. If they do so and later suffer a heart attack – no problem, the policy will pay out. But, if they do so and suffer say kidney failure or CJD or TPD then the policy pays nothing.
The old legal maxim caveat emptor (let the buyer beware) comes to mind. This is far from being a bad product and many elements can and will appeal but I’m left feeling uneasy and my advice to anyone considering the policy is to talk to an adviser first.
Plus points: Simple CI lite cover; Relatively inexpensive; Designed to be bought direct with no advice; Instant acceptance; Very clear website definitions of what is and isn’t covered and what that means.
Not so plus points: Only covers some serious illnesses; Many are not covered at all; Customers are effectively self-insuring against many serious illnesses.
Website: www.royallondon.com.
Rating (max 10): Innovation: 7. Overall: 7. Silver
Tags: CI: Royal London