Nicholas van der Nest, director for Risk Product Innovation at Liberty.
When understanding your critical illness cover is critical to correct coverage.
Imagine a scenario where you invest in critical illness insurance to give yourself security if the worst happened. You submit your claim but it is rejected because it does not cover what you thought it did. This is a reality for many because they did not quite understand what their policy covered.
According to Liberty’s divisional director for Risk Product Innovation, Nicholas van der Nest, a significant portion of claims are not paid out in terms of impairment and illness-related products because claimants do not meet requirements. “To qualify for payment under one of these, a customer needs to meet the claims criteria as specified in that policy.
“These criteria’s are designed to be as objective as possible, to remove any subjective assessment criteria, and they are usually linked to medical evidence, diagnostic procedures, types of treatment and so forth,” says Van der Nest.
Why a claim is rejected
Often claims are repudiated not because cover is limited but because policyholders do not understand what their policy covers. “Products are designed to provide as much security as possible by providing significant breadth of cover. Applicable conditions easily run into the 100s. Additionally, tiering allows for partial sum insurance payments for lower severity conditions.”
Yet, combining objective criteria and tiering can create scope for misunderstanding. “Combining these implies customers are faced with a policy document stipulating many pages of medical definitions under the product. Many people are not familiar with medical terminology used to describe an illness or details of diagnostic procedures and tests used for assessing severity of a condition.
“Thus they are unlikely to fully understand what they are and are not covered for under their products. Consequently, we often see customers submitting claims for any health condition, rather than only for those covered under their contract,” says Van der Nest.
Why critical illness?
Critical illness cover is most vulnerable to policy misunderstanding because of the significant number of conditions covered by it. “Additionally, it is often mistaken as a replacement for medical aid cover. There are key differences between the two which are often not fully understood when purchased.
“Medical aid cover pays for medical expenses incurred on an individual basis. Critical illness cover pays for the cost of lifestyle adjustments following the diagnosis of a critical illness, without accounting for any medical care whatsoever. A holistic financial plan includes both of these products.”
What does this mean for me?
The danger of misunderstanding your policy is discovering you do not have quite the cover you expected but only when it is too late. “When a particular condition is not covered under the contract, any conditions submitted for that claim will simply be declined under the insurance contract.
“The main danger to customers is where they have chosen to not purchase medical aid cover because they believed, incorrectly, that the insurance product provided sufficient cover. In this instance, they will not receive any payment and might be significantly out of pocket after suffering a medical event.”
The diagnosis of stage 0 breast cancer is an example. “A medical aid product would cover the costs of tests used to diagnose the cancer and treatment required, which can be very expensive. This can be in full or based on a benefit scale.
“Whereas a critical illness product will not pay out for this diagnosis as the impact on the customer’s lifestyle and the amount of money required to make lifestyle adjustments is very limited,” says Van der Nest.
Where to from here?
Now that you are aware of the potential to misunderstand your insurance policy, what do you do? Van der Nest says the answer is in conducting an in-depth financial analysis with a financial adviser. “This can help you expose the types of benefits required and the level of cover needed based on individual circumstances, such as income, dependants and existing cover. A good financial plan includes holistic cover against a variety of risks.”
The good news is you are not alone in ensuring you understand your cover properly. Van der Nest says insurance providers have a responsibility to simplify their products as far as possible. Yet, the reality still remains that use of objective medical assessment criteria means it is unlikely customers without medical backgrounds will fully understand every term in their policy.
“Consequently, to ensure the philosophy of the policy is fully understood and avoid disappointment at claim stage; insurers spend significant amounts of time training advisers and brokers on products and solutions. Additionally, they provide them with material to support the training and detailed brochures for customers and potential customers,” says Van der Nest.
A financial plan which accounts for your unique circumstances is dependent on sourcing help from a financial adviser. “There simply isn’t a one size fits all solution to risk cover. To have holistic cover which meets all your needs, it is crucial you discuss what you are covered for and what potential gaps might exist in your financial plan with your financial advisor.”
While we cannot predict the future, we can prepare for certain circumstances. To ensure you get the exact cover you were hoping for, ensure you have no misunderstandings about what you are covered for.
Side bar:
• Liberty paid out R3,6 billion in valid claims in 2015.
• 96%: claims submitted that were valid claims and have been paid.
• 3.2%: condition claimed for did not meet the claims requirements specified in the policy documents.
• 0.5% policyholder did not disclose important information at the application stage of the policy.
• 0.1%: claim event was specifically excluded in the policy documents
• 0.1%: deferred claims, where it is not yet clear whether the claim is valid or not and a claim cannot be made until this is determined.
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