Demystifying Dread Disease

Dread Disease Insurance was conceived in South Africa by Dr. Marius Barnard (brother of the famous heart surgeon, Chris Barnard) and became available here in 1983. The aim of the insurance was to offset the financial costs associated with the medical conditions covered. The concept quickly gained appeal internationally but many markets found the name “Dread Disease” too crude and so opted for the alternative terms of Critical Illness Insurance and Trauma Cover.

Back in 1983 the number of conditions covered was few - Cancer, Heart Attack, Coronary Artery By-pass Graft and Stroke - and the terminology relatively unambiguous. But as more medical conditions were included and severity levels introduced, so the terminology became more complex to a point where it is often said that one needs a degree in medicine to understand all the complexities of the insurance.

But then if you’ve ever read (or tried to read) the medical examination report for even the slightest of diseases you’ll know that medical science is complex and often extremely ambiguous. And the reality is that the insurance industry cannot provide the extent of dread disease cover it does without the use of this medical terminology to explain under what circumstances the insured will be entitled to a benefit.

The problem for the intermediary and the client is that not only is the terminology foreign, companies employ different definitions of claim events which makes it exceedingly difficult to compare products. All too often then, the decision of which product to choose is determined by price which can have dire consequences in the event of a claim.

It is with this background that the Life Offices Association (now ASISA) set up the SCIDEP committee (Standard Critical Illness Definitions Project) to draw up a set of standard industry definitions. The committee has focused on the big four dread diseases - Heart Attack, Stroke, Coronary Artery By-pass Graft and Cancer – which according to the LOA account for 90% of all dread disease claims.

The definitions are expected to be implemented in January 2010 and will apply to all member offices of the LOA (ASISA).

Although the aim of SCIDEP is to standardise the definitions, the committee makes the point that standardised definitions don’t necessarily imply simple definitions. Many of the new definitions are more detailed than before but they will be consistent across the different companies. The new definitions will apply to all dread disease products covering any of the four core diseases, with a few exceptions, such as functional impairment products and disability products.

The following products are examples of those that will need to use the SCIDEP definitions:

· Individual life critical illness products

· Group life critical illness products

· Critical illness with and without severity based definitions

· Life cover with acceleration on the diagnosis of a critical illness

· Waiver of premium on critical illness cover

· Mortgage protection critical illness cover

The standard definitions provide for a “Main” definition with four levels of severity A to D, with A being the most severe and D the least. Each “Main” definition will also be accompanied by a “Layman” definition. The payment for a Severity Level cannot be more than that for a higher severity level or less than that for a lower severity level.

Glacier’s Comprehensive Dread Disease Benefit currently pays out 100% for all severity levels on the four dread diseases included in SCIDEP.

Payouts on Glacier’s Comprehensive Dread Disease Benefit