Article by Barry Jones, Moneyfacts UK Protection Adviser of the year 2019
There is always a gap between expectation and reality when the public are asked about life insurance companies willingness to pay out upon claims. Expectation is low, whereas reality is actually very high.
AIG in 2017 paid out 99% of all life claims and 93% of critical illness claims. Expectation levels are set at below 80% so clearly the industry has some work to do to build trust.
Critical illness contracts, by necessity, are complex animals with pages and pages of small print definition to meet, and this required complexity is probably part of the cause. If something is too long to read, and too complex for the average person to understand, they have to place trust that a modern contract has clean, easy to meet definitions and will perform in the manner that it is required to.
The good news is that most contracts available today will do that, but even with that, there are always key differences between contracts that a good, whole of market, specialist adviser should be able to assist with.
Every company will tick the box in providing children’s cover, for example, but most offer differing sums. Some will cover children from birth. Some from day 14. Some list children’s specific conditions such as Cystic Fibrosis, Down’s Syndrome etc, some don’t. What is the definition of an eligible child- do step children count? When does cover end? Is it 18 or as late as 22?
The small print, in this instance, could be the difference between a claim being met, and not.
With a product that can be expensive it can be tempting to use an online system and source the cheapest option. The danger here being that no advice is offered and, using the children’s cover as example, the box is ticked and they all look the same.
When we advise clients upon these products sometimes the cheapest option really is the best, but a sound, up to date and in depth understanding of the small print of the covers available should be a mandatory requirement of advisers to be able to build the trust levels of the public to meet the reality.
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