Analysis: Critical illness – the pros and cons of partial payments

But despite this, many in the industry are concerned that it will not be so easy to put the brakes on a competitive market.

“At the moment we are seeing a slow and steady slide towards a PruProtect-style product,” says Mick James, business development manager at RGA UK, the reinsurer.

“That is likely to continue, but I think insurers will keep adding full payment conditions too. In my view, this merely adds to the complexity of the product and makes it more difficult for intermediaries to sell, but although the market is tired of this game and would love to put the brakes on for a while, in a competitive market there is always going to be one provider that wants to add more conditions.”

Ian Smart, head of product development and technical support at Bright Grey and Scottish Provident, also believes that competitive pressures will ensure providers continue to add more partial payments over the coming months and years.

“IFAs tend to gravitate towards the longest list of illnesses, because they want to ensure their clients have the best possible chance of the policy paying out,” he says.

However, few would deny that so far the addition of partial payments has had a positive impact on the industry’s reputation.

Claim rejections for mastectomies, for example, have generated bad press in the past, and partial payments are a way of counteracting that.

“One of the criticisms of CI is that you have to be incredibly ill for it to pay out, but partial payments can help to dispel that idea,” says Burns. “They will lead to more people being able to claim, and as long as we keep the balance right on affordability and customer understanding, then that is a good thing for the industry.”

TOO COMPLICATED?

Customer understanding is a point that is returned to time and again by both critics and supporters of partial payments. Smart, for instance, believes there is a tipping point where a severity-based product becomes too complex for the consumer.

Bright Grey and Scottish Provident currently offer partial payments on low grade prostate cancer and DCIS, and Smart says while he will keep an eye on extending this, he would not want to offer it on every condition.

“I think this is a natural extension of the illness race,” he says. “We have almost exhausted the list of full payment conditions, and now we need to look at new ways of adding value to the policy. But we believe a product like PruProtect’s is extremely complicated for the consumer and there is a danger that people will expect higher amounts of cover than they actually have.”

But Phil Jeynes, head of account development at PruProtect, says it is in fact simpler to have a product that is entirely severity-based than one which is only partly so.

“I think it is a more complicated discussion to say we will pay out the full sum assured on some conditions, but only part of it on others,” he says.

However, Smart argues that consumers may simply register the name of a condition and assume they are covered, rather than understanding there are several definitions within that for varying levels of severity.

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