ABI to re-write the rules on total permanent disability
The Association of British Insurers (ABI) is to revamp its statement of best practice for critical illness (CI) cover to revise the total permanent disability (TPD) clause to reduce the times insurers refuse payouts.
TPD accounts for just 3% of CI claims but 55% are declined because the definition has not been met.
Nick Kirwan, the ABI’s assistant director, health and protection, said: “We have seen the number of declined claims fall significantly as a result of our ongoing determination to tackle this issue. This consultation builds on our work and should see the number of declined claims fall further.
“We’ve been in long and detailed discussions with medical experts about the causes of most Total Permanent Disability claims. As a result, we are confident that the new set of definitions provide clarity and a better understanding about what makes a valid claim.
“We are hoping to spark interest and get a good cross-section of consultation responses. It is vital that consumers, insurers and other interested parties make their voices heard.”
Reputation at stake
Bernie Hickman, managing director of protection at Legal & General and chairman of the ABI’s Protection Development Committee, said: "The insurance industry is taking a proactive approach to address areas of potential consumer detriment and enhance the reputation of our products.
“Research and day-to-day claims handling experience has demonstrated that too often, customers don't understand what ‘total’ or ‘permanent’ means in the context of disability. This means that they claim for Total Permanent Disability but end up disappointed when they are declined or payment is deferred. The industry exists to pay claims when they are needed most so we want to do all we can to ensure that customers understand what are they covered for.
“Consumer research also highlights confusion between income protection and critical illness insurance. The proposed changes will make the distinction clearer, and everyone in the industry should agree is a good thing. I hope this means customers will have a better understanding of critical illness insurance and leads to even fewer declined claims.” Insurers are taking steps to reduce the “disproportionately” high number of claims the industry rejects for total and permanent disability (TPD) on critical illness cover.
The FT adds that the Financial Ombudsman Service says one third of all its CI complaints relate to TPD disputes.
