Guardian research sparks debate around terminal illness definition
New research by Guardian Financial Services has revealed that 92% of advisers think terminal illness benefit should be paid out on diagnosis of incurable stage four cancer.
Guardian research involving over 500 advisers has found that 68% strongly agree and 24% agree that if a client is diagnosed with incurable stage four cancer, the terminal illness definition within a life insurance policy should pay out on diagnosis and not on life expectancy.
The study also found that 65% of advisers would feel uncomfortable or very uncomfortable telling a terminally ill client that they could not claim until their doctor had confirmed their life expectancy was less than 12 months.
Less than a third (32%) said they would feel comfortable or wouldn’t mind.
Most advisers (67%) didn’t realise that so many life insurance claims were for terminal illness.
When told that terminal illness claims account for 20-25% of the industry’s life insurance claims, 67% said this was higher or much higher than they thought.
Only a quarter said this was in line with their expectations and 6% said this was lower than they thought.
Standard industry practice currently is for life insurance policies with a terminal illness definition to pay out when they have evidence that the claimant has less than 12 months to live.
Of the 553 advisers surveyed, 91 said they’d had clients who’d made a terminal illness claim.
Of these 13% said the claim had been declined because they did not yet have evidence that the client had less than 12 months to live.
Guardian’s survey found that 79% of advisers said their clients would be willing to pay more for a proposition with a terminal illness definition that paid out on diagnosis rather than life expectancy, with 80% saying they thought their clients would pay up to 10% more.
Katya MacLean, chief executive at Guardian, said: “The terminal illness definition is a valuable feature of life insurance, but given its nature, is not without challenges for the industry.
“It’s difficult for the medical profession to predict life expectancy with certainty.
“This causes an obvious problem if we’re using life expectancy as the criteria for a terminal illness payout.
“What it means in practice is some terminal illness claims are declined, at least initially, as the insurer has to say the claimant is ‘not yet ill enough to claim’ despite their terminal diagnosis.
“This discrepancy between the claimant’s expectations and the reality of claim is not good for the industry.
“This research shows advisers feel the same.
“At Guardian we designed our definition differently.
“We know that most terminal illness claims are for incurable stage 4 cancer. So, we’ve widened our terminal illness definition to pay out on diagnosis and not on life expectancy.
“Some could say this widening of the terminal illness definition crosses too far into critical illness.
“However, we’d argue it doesn’t.
“Terminal illness is designed to accelerate the death payout in certain cases so we can better meet customer needs.
“For us, the standard definition was not working in the way we think customers expect it to.
“So we’ve structured it in a different way that’s more in tune with client needs and better aligned with medical practices.”