The overabundance of medical definitions found in CI contracts is giving brokers the shivers. They are struggling to decode for their customers what their policy will or will not cover. A gruelling task because contracts’ definitions of illnesses vary depending on the company.
“In Canada, some technical and medical definitions may vary, although they mean the same thing. But customers and agents don’t always know that” says Eddy Levy, Director, Living Benefits, at Employers Reinsurance Canada (ERC).
Mr. Levy states that Canada has a lot to learn from the United Kingdom. The British spearheaded standardization of medical definitions in CI products. “Reinsurers and insurance companies got together in order to standardize the wording of the definitions. So the same definition for cancer is used in some 15 companies covering this illness,” he explains.
The current jumble is stunting CI sales, comments Emile Elefteriadis, Vice-President Senior Pricing Actuary at Swiss Re. “The variety of definitions is not only confusing, but it also wastes broker’s time considerably when they compare products.”
In Great Britain, CI sales were somewhat lacklustre before standardization. Impressed with the positive results, Mr. Elefteriadis encouraged Canadian insurers to adopt the same formula.
The Canadian Committee on Living Benefits, whose members include Manulife, Great-West, Canada Life, Swiss Re and ERC, began examining this issue last year. But Mr. Elefteriadis insists that the analysis has only just begun.
Rino D’Onofrio, Assistant Vice-President, Finance, at Canada Life, is a member of this committee. He says that the committee is striving to eliminate minor variations in definitions to avoid misinterpretations. He admits this goal has its limits. “We cannot dictate the new definitions, but we can suggest.” Insurers will not hesitate to adopt these definitions, he continues, because they do not erode product competitiveness. “Instead they will try to differentiate in other product aspects.”
Alain Landry, Expert Consultant in CI with Laurentian Financial Services, also agrees that the industry would benefit from standardizing its definitions. “Representatives are stumbling over the definitions. The texts of some companies are more complex than others, and sometimes the definitions are convoluted.”
Risk of lawsuits
Sparse definitions do more than confuse brokers. Critical illness consultant Sean Long points out that brokers are having to set customers’ straight on nuances that have more to do with medicine than with insurance. Brokers then become targets for litigation, he says. “If a sick customer is denied an insurance amount that he could have gotten with another company’s product, who will he go after? His broker of course.”
Insurers have a lot to gain from tidying up their definitions, states Mr. Long. “If the industry doesn’t regulate itself, the government will have to step in,” he predicts. But he says he doubts that insurers will act on their own. “It would take an external force, such as brokers.”
More illnesses, less clarity
At the same time, insurers have been constantly adding to the medical conditions covered in CI policies. For now, Canadian products stop short of 30 illnesses. “I hope there won’t be more because it would overcomplicate the product for brokers,” Mr. Levy remarks. He adds that cancer, stroke and heart attacks account for 85% of the CI risks. Kidney disease, multiple sclerosis and coronary bypass make up only 7% of the risk. “Conditions other than the top 6 illnesses are not absolutely necessary.”
“Some companies, which I prefer not to name, have added illness that are totally superfluous. It is not the number of illnesses covered that counts but rather the relevance of each,” cautions Mr. Elefteriadis.