The country’s largest insurer has improved its critical illness cover (CIC) but has yet to offer premium reductions for customers if an exclusion is placed on their policies.
Critical illness policies pay a tax-free lump sum on the diagnosis of a range of specific conditions with cancer, stroke and heart attack the most common claims.
Insurers often compete on the number of conditions they offer, with most covering about 20-30, and payouts are based on the illness meeting a specific policy definition.
This week, Aviva announced it was increasing the maximum sum insured from £500,000 to £2m, extending the terms for which policies are available and widening the definitions covered for all new policies.
It also added five new conditions to its list for cover: aplastic anaemia, cardiomyopathy, encephalitis, liver failure and progressive supranuclear palsy.
Financial advisers welcomed the improvements, saying Aviva had been lagging the market in terms of the comprehensiveness of its policies.
“It means it is now more competitive, whereas previously its CIC offering was not competitive,” said Matt Morris, an adviser with LifeSearch, the specialist protection independent financial adviser.
However, Morris pointed out that the added conditions were rare and might not result in a large number of payouts. “Heart attacks, cancer, stroke and multiple sclerosis (MS) make up the overwhelming majority of claims,” he pointed out.
“I imagine the new conditions will only account for a handful of claims.”
As a result, the number of conditions covered in a policy should not be the only focus when comparing cover, claim advisers. They say that, along with premiums, other policy features such as counselling support should be taken into account.
Another key consideration is whether premiums will be reduced if there is an exclusion placed on the policy.
Exclusions are commonly placed for conditions such as bad backs or MS and for those who have a strong family history of cancer.
Currently, only four providers will make premium adjustments for exclusions, including Bupa, Fortis, LV= and Zurich.
“I admire Aviva for enhancing the critical illness definitions that are already available,” said Peter Chadborn, principal with CBK, the independent financial advisers.
“However, I would also have liked to see the introduction of premium reductions should certain definitions be excluded following underwriting.
“Insurance companies that adopt this approach enable their customers to get critical illness cover whereas some companies would have precluded them from doing so based upon pre-existing conditions or family history.”
Aviva said this week that it intended to introduce the reductions for its customers in the near future. “We are planning to do it, but we were focused on the enhancements and are just working on the mechanics of how the reductions will be applied to premiums,” said Michael White, chief underwriter with Aviva.
“We are doing this as it is clearly the right thing to do for customers.”
