Standard definitions for critical illness insurance (CI) products are already in place in the United Kingdom, and leading advisors argue that Canada should follow suit.
Standardizing definitions means that insurers would no longer have their own unique medical definitions, as is the present case in Canada. With standard definitions, for example, there would be only one definition for heart attack used by all the companies.
Supporters say standard definitions will attract more advisors and make things clearer for consumers.
David Benamron, director of living benefits for the managing general agency Copoloff Insurance Agencies, is a big fan of standard definitions and says that it is imperative to bring them to Canada.
“If they want people to sell this product they have to get the complications out,” he says. Mr. Benamron adds that advisors are not doctors and they should not be expected to know all the insurer’s different definitions. He also highlights that insurers should compete on service, claims experience and originality but not on who has better definitions.
“Especially when guaranteed rates go away, insurers have to find other ways to make the market attractive,” says Mr. Benamron. He adds that standard definitions will most likely appear in the next 10 years.
Another supporter of standard definitions is CI leader Alphonso Franco. He says that Canada has followed the U.K.’s path for CI and that standard definitions will be another aspect we will adopt. Mr. Franco does not expect that all conditions should carry a standard definition. “A good number can be picked by reinsurers, such as stroke and heart attack.”
Mr. Franco sees standard definitions as a win-win situation for everyone. There will be more clarity for clients, and advisors will have a legal defence. He explains that lawsuits will be avoided when there are clearer definitions across the board.
He also suspects that standard definitions will be arriving sooner than later. “The time is overdue! The sooner the better because it will save a lot of trouble for everyone involved,” adds Mr. Franco.
Sean Long, CI educator and founder of the website www.criticalillnesslearning.com, sums up definitions as, “paralysis by analysis.” Mr. Long’s suggestion is that cardiologists, for example, should be asked to give a definition of a heart attack and oncologists to give a definition on cancer.
“Those will be the standards for the next three to five years. After that time we will revisit the definitions…. In other words, the consumer is not held hostage to a policy issued in 2000 for the definition of a heart attack.”
This way he says advisors will feel they are being treated fairly and equitably and the consumer feels that based on the latest medical technology available, they are being judged on the latest definition of a heart attack.
Mr. Long highlights that more advisors will be drawn to CI with standard definitions. “Everyone always asks, ‘whose definitions are the best?’ And that question should never come up. The question should be: ‘Can I safely sell this to my consumer? And will a claim be paid?’ In the U.K. and Ireland, definitions never come up. The products compete based on price, number of illnesses, and most importantly, service.”
He adds that the only reason standard definitions have yet to arrive in Canada is because reinsurers have not had enough pressure from advisors or insurers.
General manager of Best Doctors Canada, Don Thomson, says that if standard definitions would ever cross the ocean, it would be a long process to implement.
He also questions who would lead the movement to bring standard definitions to Canada. Mr. Thomson explains that in the U.K., it was the independent financial advisors who started the movement.
As for whether consumers will benefit from standard definitions, Mr. Thomson is sceptical of how much influence it would have. “I have yet to meet a consumer that knew what the definitions were. Many don’t even know how many illnesses they are covered for. So even if there is standardization, how much impact does it have on a client deciding to buy coverage?”
He adds, however, that standard definitions would help part-time advisors selling CI. “After looking at all the company definitions, at end of the day I am confused! I feel for the casual advisor that sells 12 policies, standardization would help here. It is comforting for them to only have to learn one set of definitions.
Mr. Thomson also questions who would regulate the standard definitions. He explains that in the U.K., the market is much more heavily regulated. “Will it be the CLHIA (Canadian Life and Health Insurance Association)? And what are the penalties if a company does not adopt standard definitions? What happens if one company decides to put out more liberal definitions, what are the consequences?” he ponders.
Mr. Long responds by saying that in the UK, 95% of the companies have standardized definitions and the insurers that have not agreed to standardize have the lowest sales.
He stresses that no company should be forced to adopt the standard definitions in Canada, but that clients and advisors will most probably prefer those that do.
From an insurer point-of-view, Richard Elias, director of marketing, living benefits for Eastern Canada at Manulife Financial, says that standard definitions create a more secure marketplace. “Brokers would feel less concerned of selling the right company, because everyone is on the same playing field. So companies could concentrate on positioning it to clients and maintaining the momentum CI is experiencing right now,” he says.
But not everyone is a fan of standard definitions. Dick Gilbert, CI expert and president of the MGA MegaCorp, sees no need for them. “I don’t see anyone trying to standardize disability insurance or universal life,” he says. Mr. Gilbert adds, “I am vehemently opposed to standardizing definitions. Standardizing definitions will only result in a lack of innovation, competition, and benefits for the consumer. Companies and agents that are in favour of standardized definitions, either have a hidden agenda, or they’re too lazy to take the time to understand the product.”
Lloyd Steinke, executive vice-president at Munich Re, says it is highly unlikely that standard definitions will ever come to Canada. “It requires some catalyst to start the process,” and adds that no one is taking the lead.
“Standard definitions have not worked that well in the other countries. When you have them you are kind of locked with them. Even if someone were to force a change, how would you get everyone to agree?” he questions.