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Navigating the complex world of critical illness definitions

01 August 2012 Dr Dominique Stott, PPS

Critical Illness (CI) benefits are designed to pay a benefit when your client suffers a life changing health event, whether surgical or disease related. Unfortunately the benefit definitions are notoriously complex due to the medical terminology used to define them. What should you know to ensure your client is covered?

It is important that CI benefits are specifically and medically defined to provide accurate pricing for a particular illness severity as well as ensure that appropriate benefits are paid. The Standardised Critical Illness Definitions Project (SCIDEP) undertaken by ASISA went a long way towards addressing the misunderstandings around benefits definitions. It helped clarify uncertainties about different claim definitions with different insurers for the four main diseases: heart attack, coronary artery bypass graft, stroke and cancer.

A doctor / provider dictionary

SCIDEP also clarified for treating doctors the criteria used by insurers when defining CI events. Clinical definitions may differ from the medical definitions by the insurer. A shortcoming of SCIDEP is that it does not necessarily simplify the terminology, with the result that the definitions may be more complex than the company product definitions.

There are also illnesses that can be regarded as ‘critical’ but that fall outside the four main categories. As a result most companies have provided for these diseases through the provision of additional benefit criteria. Complex definitions for these illnesses, which also rely on medical or other terminology, are inevitable.

Among the complexities of these additional benefits is the use of Activities of Daily Living or Whole Person Impairment to define when a benefit will be paid. You must remember that CI products are not only about comparing how many benefit criteria are present, or which company pays how much on the SCIDEP grid. There are many other factors that need to be considered before selecting recommending a CI product to your client.

Tiered versus lump sum

To ensure that the most appropriate CI product is selected you must consider aspects such as the difference between a tiered benefit and a 100% lump sum only. A lump sum paid out for an early CI diagnosis may leave no funds for a similar or related event that may occur at a later stage. For example, if a lump sum is paid for an early cancer, which then reappears a few years later, it is possible that no benefit will be paid due to this being a related condition.

A tiered benefit paid on early diagnosis would also pay the additional benefit following the second diagnosis, which may have grown to a larger amount than would have been paid out originally. Other aspects that should be considered are:
• The maximum and minimum CI cover amounts and application ages.
• The survival period often varies between companies. If your client dies before the survival period runs out then no benefit is paid.
• Some products will not reinstate for further claims for events that are considered related, such as a stroke after a heart attack.
• Some products will cancel benefits subsequent to certain types of claims, for example HIV-related claims may lead to cancellation of the cover after the benefit is paid.
• Whether a standalone product is available for clients who wish their CI cover to be independent of their life cover.
• The standard exclusion clauses in the product, for example, whether claims due to hazardous pursuits are excluded or not.
• When it comes to CI products for women, investigate whether the cancer benefit pays for prophylactic mastectomy for breast cancer.

Knowledge-based relationships

Clinical definitions for CI products are complex. By paying close attention to product benefits you can ensure that your clients receive comprehensive cover from their CI policy. A sound knowledge of clinical definitions and an understanding of the differentiating factors between CI providers will contribute to a high level of customer service.

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