Improving the industry's image

Within an environment of increasing consumerism, enhanced transparency will assist to improve the image of the long-term risk insurance industry and reduce the number of disputes referred to the Ombudsman.

There are a variety of ways in which the industry could adopt a less complex approach to disability, impairment and critical illness cover, says Craig Harding, managing director of specialist long-term risk product provider, Altrisk.

"The key is to ensure that clients know what they're paying for upfront. Providing a better understanding of what a premium covers reduces intermediary risk and ensures client expectations are met in the event of a claim."

Standard definitions

Harding adds that an important step in support of this goal is the adoption of standardised definitions across the industry, something which the LOA has been working towards in the area of critical illness for some time.

"Event and benefit definitions should be standardised for a set of base products and benefits to ensure there is no ambiguity among product offerings. This has been the focus of the LOA project and should be extended to disability definitions for physical, functional and occupational disability. Furthermore, these definitions should be written in way that everyone can easily understand".

Common base

A common understanding across the industry would go a long way to enhancing its reputation as a whole, says Harding. "This is an area where the industry should cooperate to the benefit of clients and intermediaries. Working from a common base still leaves room for players to innovate and distinguish their offerings on scope or enhancements and creates a far less confusing environment."

Streamlining general exclusions

Another way of demystifying the industry is through the removal of unnecessary general exclusions as they complicate the claims process and result in disputes when clients' expectations are not met. "They should be adopted only when there is a genuine risk for the industry - not simply because they have always existed."

Speaking English

Harding also notes that there is a need to make documentation easy to understand. Using plain English and shortening the length of documentation - from application forms to policy documents – helps reduce misunderstandings. "When clients buy insurance, it's a promise to pay if an identified event comes to pass in the future. They need to know the terms and conditions under which they will be paid and when they won't.

"It's misinterpretation that leads to disputes. If all the players cooperated to implement simple measures to ensure clients understand what they're buying, the true value of insurance could be realised and the reputation of the industry could be enhanced".