Martin Duffy, Chartered Insurer, Head of Underwriting and Protection Claims, Irish Life
At Irish Life we want to help ensure that our customers and their families are protected if a death expectantly happens, if they get very sick or if they can't work due to an illness or injury.
For me, a plan covering specified illness should be a core part of the range of protection we can offer customers. Think about it. The concept is very simple; it provides a tax free lump sum to a customer, at the time of a significant and/or potentially life altering medical condition. Claims are usually paid very quickly, typically 4-6 weeks and the average amount paid by Irish Life in 2016 was €62,229.
So it's big thumbs up overall!
In this context, I thought it would be useful to review the history of specified illness, what we currently do well and some things to think about looking at this product into the future.
I would roughly estimate that life offices in Ireland paid over €100 million in specified illness cover claims during 2016; that's around €400,000 every working day or probably paying 7-8 families a lump sum at a very challenging time for them.
Current specified illness cover plans in Ireland typically cover up 60+ medical conditions, which can sometimes cause confusion, but it's important to remember that 9 out of every 10 claims are for the top 5 conditions - malignant cancer, heart related, stroke, multiple sclerosis and Loss of Independence / Permanent Total Disability. The most common cancers we pay claims under at Irish Life during 2016 were breast (155), prostate (71) and colo-rectal (43).
None of us can predict the future and of evidence of this , we in Irish Life have paid a number specified illness claims during 2016 on plans that were only in force a short period of time - see the table below. These cases were routinely investigated at point of claim and all were very genuine sudden onset medical conditions. These kinds of claims help to show that having specified illness cover should be a part of any protection conversation we have with customers.
A customer's fear of an insurance company not paying out a claim may be a natural one, but rationally the facts do not support this fear. During 2016 Irish Life paid 98% of death claims, 90% of specified illness claims and in fact 96% of malignant cancer specified illness claims. Irish Life has been publishing specified illness cover claims statistics for over 20 years. It is interesting to note that during 2016, 42% of Irish Life's paid specified illness cover claims were on plans in force longer than 15 years. Also during 2016 Irish Life paid almost 70% of specified illness cover claims within 4 weeks or less. So customers can have confidence in Irish Life protection products.
During 2016, 22% of our applicants for a new protection product were born in a country other than Ireland. In fact we saw applicants born in over 140 different countries and this shows Ireland to be very much part of the global family. However, as a result, one of the issues we already encounter is obtaining medical information from overseas at point of claim. We have access to translation services and specialist companies to assist us with these issues when needed but, this can still be a challenging area. A number of life offices in Ireland have also seen an increase in attempted claims frauds from abroad, although the absolute number is very low.
So overall, we can be very proud of this product and the unique and valuable protection it provides for Irish families.
Specified illness cover as a product was conceived by surgeon Dr Marius Bernard in South Africa in the early 1980s. To quote him,
"I was used to operating on people and boasting about my great results of patients surviving five or six years. But all of sudden I saw the social and financial implications. I knew nothing about insurance but I knew life insurance paid out on the diagnosis of death. But to me, my patients lived for years but in this time they died financially."
The first products were launched in South Africa in 1983 and were very simple, covering 3 main illnesses - malignant cancer, heart attack, and stroke. It was launched in the UK in 1986 and after a slow start it became a big seller. The product was introduced into Ireland by Abbey Life in the late 1980s (subsequently taken over by Canada Life and now part of Irish Life).
Rapidly over the 1990s and 2000s the product expanded to include children's cover and many more medical conditions.
In the early 2000s, concerns emerged among reassurers around guaranteeing premium rates for 20/25 years into the future and as a result prices went up and sales naturally slowed down as a consequence. Over the last 10 years, these issues have stabilised and prices have decreased somewhat, but this pattern is now slowing up or even reversing.
We in Irish Life have continued to develop this product over recent years e.g. expansion of cover to include additional payment conditions e.g. ductal carcinoma of the breast , better cover for coronary angioplasties and improved children's cover. Irish Life paid 20 additional payment claims and 24 child specified illness cover claims during 2016.
Other changes to the product have been driven by developments in medical practice. For example, in relation to some less severe prostate cancers , the medical approach may now be simply 'watchful waiting' rather than direct surgical intervention, which has supported the development of an additional/partial payment for low level prostate cancers, where some intervention is undertaken.
In the UK the Association of British Insurers has via technical medical working groups issued six 'Statement of Best Practice for Critical Illness 'between 1999 and 2014. While companies in Ireland are not ABI members, typically we have followed these sensible guidelines. This is turn has led to changes in definitions of things like 'heart attack' and 'stroke' to make these conditions clearer as to what's covered and what's not covered, as well as an element of future proofing the definition.
What might the future of this cover look like?
In some other parts of the world companies offer a whole range of different variations. For example some offer very basic products with only 3 conditions being covered, some the complete opposite with 150 + conditions being covered!
Extra conditions are offered in some markets on children's cover plans for example conditions like Downs Syndrome, cerebral palsy and spina bifida. While they may be appealing to include, they make the children's cover element expensive to include within a parents plan.
In some countries for malignant cancer, different levels of payment are make depending on the severity or what stage the cancer is at when diagnosed. For example only 25% of the sum assured may be payable for a T1 cancer right up to 100% for a T4 cancer. In some countries the size of the benefit paid is linked to the person's age i.e. more than 100% of the sum assured is paid if a condition presents at a younger age, say before age 50. This reflects the likely more severe financial impact a significant medical diagnosis has at a younger age.
In Asian countries it's not unusual for companies to market a child only product or a female only product. Muli pay products are also available in some countries, where a customer can claim for more than one specified illness event under the same plan. For example they get paid a claim for a malignant cancer and then cover stays in force and they can then claim again for a different condition in the future e.g. heart attack.
As it has in the past, developments in medicine will also drive product changes and amendments into the future. More medical screening is being done in Ireland, so these will drive up earlier detection of some conditions e.g. colon, cervical and breast cancers. MRI scanning for example is getting even more sophisticated and this may drive up early detection of some brain tumours even before symptoms start. Then there is the whole area of genetic testing; where will that be in 15 years' time?
The future is not without its challenges for this product but the industry has innovated in the past as a result of changes and I am confident it will do so again. We will continue to seek even better ways to ensure that customers are protected in the event of a sudden life altering illness.
In summary I believe the specified illness plans available in Ireland offer very comprehensive cover, and are very good value for money by international standards and meet a real customer need. I will finish with a quote from a complementary letter the Irish Life claims team received from a financial broker after we paid a malignant colon cancer claim to a man in his late 30s - this goes to the heart of specified illness cover as a core part of the protection we can offer customers.
"It's only at the claims stage do we fully appreciate how valuable a role we play in providing good advice and products to our clients.
It certainly gives me a great sense of satisfaction to know that we have made a difference to this young family at a difficult time."