PERSONAL FINANCE: Critical Illness Cover Suffers Its Own Crisis; Jane Hall Reports on an Unhealthy Development in the Insurance Market
Byline: Jane Hall
PREMIUM hikes, a major insurance firm failing to honour quotes and new rules tightening the conditions under which customers can claim - it all adds up to critical illness cover that is undergoing a health crisis of its own.
Critical illness insurance (CII) is meant to guard against the unexpected.
These policies guarantee to pay a lump sum - usually equivalent to the size of your mortgage - if you suffer a specified critical illness, such as cancer or a heart attack.
But many of the eight million people who are currently covered by four million policies, may be wondering whether it's worth the money and the hassle.
The cost of such cover for those who don't enjoy the financial cushion of paying guaranteed premium rates, has soared in the past few months as insurers battle against the rising cost of claims on CII policies.
These have been largely brought on by improved medical screening procedures that diagnose serious illnesses earlier than before.
That would be bad enough news on its own. But from the end of May all insurers must have adopted new rules set by the Association of British Insurers, tightening the conditions under which customers can claim on CII policies.
And it will mean getting cancer or suffering a heart attack may not qualify as a critical illness.
All such policies cover against seven ``core illnesses'', including cancer, heart attack, kidney failure and major organ transplant. Insurers can also cover you for additional conditions such as Parkinson's disease, loss of limbs and terminal illness.
But in response to the growing number of claims being made, the ABI has drawn up new definitions for heart attacks and cancer.
The ABI maintains the changes are necessary to ensure critical illness cover remains at an affordable level for consumers.
Emma Grainge of the ABI says, ``The definitions are kept under regular review, largely because medical technology is moving at a very past pace. It is becoming easier to diagnose conditions earlier, which is being shown in the rise in claims being made before an illness becomes critical.
``Take prostate cancer as an example. The Government is introducing a screening programme, so the number of people diagnosed earlier is rising. It is not about excluding prostate cancer, it is about making sure a policy only pays out when it is meant to.
``Unless we take steps to address this, premiums will rise sharply.''
But they already have. Scottish Equitable has increased the cost of its CII policies by up to 60% since December 2002, while both Friends Provident and Bupa have put up premiums by around 50% since January.
And others, including Swiss Life, Zurich Life and Prudential have raised rates by between 10% and 40% during the past few weeks.
Prudential's move has sparked an outcry, however.
Tens of thousands of people who thought they had signed up for life insurance and critical illness cover, have been left in the lurch after the Pru decided not to honour quotes it issued weeks ago after being swamped with applications. …