Terminal illness cover is not fit for purpose in its present state and needs to be radically overhauled, according to Cura Financial co-founder Alan Knowles.
Knowles illustrated this with the powerful story of his client Janice who had two terminal illness claims on life cover policies initially turned down after she was diagnosed with stage four cancer, placed in palliative care and granted the government’s terminal illness benefit payment.
Speaking at the Protection Review conference, Knowles proposed a series of changes to the product to bring it up to date and which he believed would be welcomed by customers and advisers along with making claims easier to handle for insurers.
He argued that changing its name would reduce confusion and help define it better in the sales process and that exclusions for claims within the last 12 or 18 months of historic life policies should be removed.
And he added that grey claims panels, improving the benefit to cover certain conditions, and making partial payments would all be significant improvements.
“Having stage four terminal cancer and being in palliative care wasn’t good enough,” he said.
“Being eligible for the terminal illness benefit from the government wasn’t good enough and having a specialist say she may have had less than 12 months to live wasn’t good enough.
“It meant two insurers turned her claim down. Her words to me were: ‘Alan, I wish I had waited until I was dead. It would have been easier than what they’ve put me through’.
“That was absolutely heart-breaking.”
‘No longer fit for purpose’
Knowles highlighted that terminal illness can be an incredible benefit, noting he had seen some “exceptional examples”, including where one insurer paid out in a week to someone who had stage four lung cancer.
But he argued improvement was long overdue for the product.
“Terminal illness benefit has barely changed in 40 or so years since its inception and I believe it’s no longer fit for purpose,” he said.
“If you are stood in a hospital room and you are told you are terminally ill you are going to expect to claim on your terminal illness policy.”
He suggested to avoid confusion with critical illness (CI) it could be renamed to either end of life benefit, or following the US with accelerated death benefit.
Knowles added he was delighted every mainstream insurer has removed claim exclusions in the last 12 or 18 months of the policy from new products, but this would be “amazing” to rectify on old plans.
“We have millions of existing policies where we still have that exclusion on and do we really want to be in the position where we tell somebody they won’t get a terminal illness claim paid out because they only have 11 months and 28 days left on their life policy?” he continued.
“How amazing would it be to write to all of your customers and say we are making your policy match our new policies and removing the exclusion at the end of your policy.
“Talk about putting clients at the heart of what we do.”
Grey claims panel
Potentially the biggest problem is that following 40 years of medical advances people are now living longer when receiving their terminal diagnosis, which unfortunately is reducing the value of the terminal illness benefit.
To avoid postponing or turning down claims Knowles argued every insurer should have a grey claims panel.
“If Janice’s claim had gone to a grey claims panel I think it would have been hard to have not justified paying her claim,” he said.
He added that improving the benefit to cover conditions such as motor neurone disease and stage four incurable cancer which equates for more than 90% of claims would be effective.
And lessons could be taken from CI cover by making a partial payment – where once there is a diagnosis and a terminal illness 25% is paid out and then the full amount is released when there is a definitive less than 12 months to live.
‘Sell life insurance on quality’
“I know there are two reinsurers who have made similar suggestions to the industry and I know this would be welcomed by advisers and customers as well as insurers because terminal illness claims are difficult for insurers to deal with,” he said.
“You might say it’s not possible, it’s too expensive. My answer is to charge for it. Life insurance is too cheap. Why do we sell CI on quality and sell life insurance on price? This would give you a reason to sell life insurance on quality.
“All three insurers paid out for Janice’s claim and it has made an incredible difference to her life and her family’s life but with two of them I did have to get involved.
“Stories like Janice’s are only going to get more common unless we do something about it,” he concluded.
