29th August 2024

The Evolution of Critical Illness Claims: Transparency, Disparities, and the Road Ahead

It was 20 years ago today. No, not when Sergeant Pepper taught the band to play - that was 1967. I’m referring to 2004, the year insurers began releasing critical illness claim statistics.

Back then, the declinature rates were alarming, with Aegon rejecting 28% of claims and Aviva 26%. These figures were unacceptable and a blemish on the protection industry. The BBC’s Panorama devoted an entire program to the problem, leaving the representative from the Association of British Insurers (ABI) visibly uncomfortable as a litany of examples and statistics were unveiled. This bad PR, picked up by the financial press, dissuaded many from taking out valuable protection plans.

Thankfully, this public embarrassment spurred the industry into action, leading to a re-evaluation of practices. Insurers, albeit some grudgingly, began to open their claims-statistics doors. This newfound transparency had the effect of reducing the percentages of declined claims, with 2008 figures showing Aegon rejecting 9% and Aviva 10% - numbers not too different from today’s declinature rate of around 8%.

So far, so good. However, the question remains: what exactly are insurers attempting to convey to both advisers and the public? The annual claims announcements tend to focus on the percentages of claims paid, the total financial sums paid, and the three or four main causes of a claim. 

While this is useful as top-down information, these figures in isolation actually serve to misinform because they omit an important ingredient. This missing element could better inform advisers and consumers alike, helping advisers select the most appropriate plans and promoting the use of two single life plans instead of a joint life version.

The ingredient in question is gender-specific claims statistics. Most advisers are aware that cancer is the leading cause of critical illness claims, with the latest statistics showing it accounts for between 59% and 68.5% of all paid claims. What many do not realise, however, is how these statistics hide significant disparities between the sexes.

The table below focuses on the top six reasons for a paid claim using data supplied by a leading high-volume insurer, emphasising the incongruities:

From the data, it's evident that cancer accounts for almost 75% of all female claims, whereas only 3.5% of female claims are related to heart attacks. Conversely, male cancer claims sit at around 50%, with heart attacks making up almost a fifth (17%) of their total claims - nearly five times the female claims for the same cause.

Multiple sclerosis and benign brain tumours are more common among female claims, whereas Parkinson’s disease predominantly affects males, with a ratio close to 4:1.

Armed with this knowledge, advisers can select the most appropriate plans for their clients, utilising insights and analysis from platforms like CIExpert. Such analysis is essential in assessing value and outcomes, especially in meeting Consumer Duty requirements. Therefore, I urge all insurers to provide this vital information. 

While discussing claims information, a word or two must be reserved for insurers offering income protection. There is no clear guidance on how to present this information, with some reporting new claims during the year, others choosing to include all claims being paid (which boosts the percentage figure), and some, like LV=, providing both.

For advisers striving to instil confidence in the industry, these disparate figures present a major challenge, and I suspect many advisers are not even aware of these differences. This is an area where the ABI’s intervention is sorely needed.

Alan Lakey, CI Expert
https://ciexpert.uk/

Business Development