Getting to the heart of critical illness claims

Sunday, 21 l 11 l 2010 Source: The Sunday Times


By: Lorna Tan

Newer insurance plans and riders allow multiple claims, reports

Breast cancer patient Theresa Tan was shocked when her insurer rejected a claim she had made against her critical illness policies in August. Ms Tan, 42, had bought three critical illness policies from the same insurer at different times. However, her claim was turned down as none of her critical illness plans covered her medical condition, which is an early stage breast cancer known as ductal carcinoma in situ.

She had undergone a mastectomy in June and, so far, appears to be free of cancer. She was unaware that under the terms of traditional critical illness plans, only those afflicted with a later stage of cancermwould qualify for a claim. She claimed she was not informed of this even though she had emphasised to her agents that her mother had died of breast cancer and that she wanted to be insured against the risk.

Ms Tan has a separate hospitalisation and surgical policy which covered her hospitalisation bill of about $30,000. In a nutshell, a traditional critical illness plan pays a lump sum if you are diagnosed with one of 30 major illnesses. The payout helps to defray living expenses when one is recuperating, to pay for ancillary medical expenses, and can be used for reconstructive surgery such as breast reconstruction.

A downside is that once you are awarded with a payout, the policy is usually terminated and you are left with no critical illness cover. Until 2006, most critical illness plans covered only one occurrence of a critical medical condition. Since then, insurers such as AIA, Aviva, AXA, Great Eastern, HSBC, Tokio Marine and Prudential have launched critical illness plans or riders that cover early stages and/or multiple occurrences of illnesses. In Ms Tan’s case, she would have qualified for a claim if she had bought an early payout plan. The Sunday Times highlights some of these enhanced plans.

AIA Complete Critical Cover

It allows policyholders to make multiple claims over the life of the policy, with total payouts of up to 200 per cent of the insured amount. This means that if the sum assured is $200,000, the plan can pay up to $400,000. The payout depends on the severity level (early, major, or catastrophic) of the critical illness. For instance, up to 25 per cent of the sum assured is claimable upon the diagnosis of an early stage critical illness.

Mr Paul Hughes, chief marketing officer at AIA Singapore, highlighted that the “catastrophic” critical illness benefit covers five medical conditions – cancer, stroke, heart attack, major organ transplant of the heart and kidney and paralysis (loss of use of limbs) – with the first three conditions accounting for the vast majority of critical illness claims.

The plan offers a one-time payout for a major cancer relapse, which is a second claim on cancer upon a recurrence. The “catastrophic” critical illness benefit provides coverage up to age 75, with guaranteed yearly renewal. In addition, premiums are waived upon a “major” critical illness claim of up to 100 per cent of the insured amount payout, noted Mr Patrick Lim,associate director at financial advice firm PromiseLand Independent.

Aviva Ideal CI Protector (termplan) with CI Recovery

Benefit Rider

Launched in 2006, the plan and the rider allow for two critical illness claims. The rider provides cover for a second unrelated critical illness but that second claim is limited to 75 per cent of the critical illness benefit amount in the basic policy.

This benefit is provided on the basis that the first critical illness event was diagnosed before the person whose life was assured turns 65 years old. There is a one-year waiting period from the date of diagnosis of the first critical illness event in the basic policy before the second critical illness claim can be paid. A plus point is that it provides cover until the age of 99.

AXA HealthPro Multiple

Benefit Rider

Launched in July, this is sold as a rider to AXA’s HealthPro Growth and HealthPro Living whole life basic plans. Customers can claim up to five times under the bundled plan plus rider, of which up to three can be cancer claims.

The diagnosis of cancer in the subsequent cancer claim must be made only after the expiration of a five-year cancer-free period. Other than cancer, there is a one-year waiting period imposed for another claim. And only one claim is admissible under each of the other critical illness categories. Apart from critical illness claims, the rider provides an additional $5,000 lump-sum death benefit. Future premiums for the rider are also waived upon the first successful critical illness claim.

Great Eastern (GE) Early-Payout CriticalCare

It covers up to 60 medical conditions, which range from the early stages, or less severe, to the advanced stages of critical illnesses. A plus point is that it allows customers to claim as and when the need arises, up to 100 per cent of the sum assured.

GE customers enjoy the benefit of multiple claims with no waiting period required between submissions of claims. This applies to claims made across different critical illnesses or across severity levels of the same illness. This plan may be purchased as a term policy or as a rider. For the rider, the early payouts will not deplete the basic sum assured in the basic policy.

GE’s chief executive (Singapore), Mr Tan Hak Leh, said that the payout can be used to maintain a policyholder’s existing lifestyle expenses should he need to stop work while undergoing treatment or while receiving home nursing care. “It allows him to seek the much-needed treatment before the illness progresses to a life-threatening stage,” he added. PromiseLand’s Mr Lim noted that a downside to this plan is that the cover ceases at age 75.

HSBC VitalCare (termplan) with VitalVantage Rider

The plan bundled with the rider offers two critical illness claims. It pays 80 per cent of the sum assured for the second claim for a critical illness that is unrelated to the first claim, noted Ms Tang Yin Fong, wealth management firm Providend’s risk management senior specialist.

Prudential’s PruMultiple and PruEarly Stage Crisis Cover

PruMultiple Stage Crisis Cover pays up to three critical illness claims with a limit of just one claim from each of the seven groups of critical illnesses. But it allows up to two claims for cancers, subject to a five-year cancer-free period, and an additional one-time payout for angioplasty and other invasive treatment for coronary arteries, said Ms Tang.

Future premiums are waived upon the first claim, subject to some conditions. Last month, Prudential launched its PruEarly Stage Crisis Cover in a bid to provide complete critical illness solutions for customers. Like GE’s product, it allows for multiple claims and there is no waiting period required.

Tokio Marine’s TM Peace of Mind (CancerCare)

As its name suggests, it is payable for claims arising from cancers only. You can claim up to five times for early cancer, each time on a different affected organ. There is no waiting period between each claim. If you are diagnosed with an early stage cancer, the payout is 10 per cent of the sum assured subject to a cap of $30,000.

If you have a major cancer on the first claim, the insurer will pay the sum assured. The maximum sum assured for this cover is $300,000. The cover ceases at age 70, which is a minus point. As it is a cancer-only cover, the premiums are lower compared to those for other enhanced critical illness plans.

Based on a sum assured of $200,000, the annual premium for a 35-year-old man (non-smoker) is $1,006 for cover until age 70, according to Mr Lim of PromiseLand. For other enhanced covers, the annual premiums would exceed $2,000 based on similar assumptions. An exception is PruEarly Stage

Crisis Cover, which allows only a maximum sum assured of $100,000. Mr Lim noted that for this cover, the annual premium for a 35-year-old man (non-smoker) is $1,338 for a term of 40 years.

WHAT FINANCIAL EXPERTS SAY

Enhanced critical illness plans receive the thumbs up from Mr Patrick Lim of PromiseLand Independent. This is because the older generation of critical illness products do not provide comprehensive coverage and usually allow only one critical illness claim. As the cover is usually bundled with a whole life or term plan, the protection from the main plan terminates when a successful critical illness claim is made against the policy.

The new-generation critical illness plans address the need for early payouts and, for some plans, they provide the potential of multiple claims up to five times, said Mr Lim. When considering such plans, his advice is to go for a long-term cover beyond the age of 75 as the incidence of critical illnesses tends to increase with age.

On the other hand, Ms Tang Yin Fong of Providend believes that the traditional critical illness plan is sufficient for most people unless one is self-employed. This is because the traditional critical illness plan is payable only for advanced stages of a critical illness. And it is really when we are severely ill that we may end up with not just hefty medical expenses, but also a loss of income, she explained.

It may seem easier to claim from an “early payout” policy because it is increasingly common to detect critical illnesses early, thanks to medical advancements and the growing popularity of periodic health screening. However, Ms Tang highlighted that each payout is generally just a percentage of the insured sum, and therefore may prove to be relatively small.

This may not justify the much higher premium of such a plan, which may be double that of a traditional critical illness plan. “Moreover, we may well be able to manage the much lower cost for early treatment, especially so with a right H&S plan. “A quicker recovery from early detection and treatment may also mean minimal disruption to income earning, so the provision for income replacement from an enhanced critical illness plan may not be necessary at this juncture,” she added.

Nevertheless, if a person’s budget allows, the “enhanced” plan can be a supplement for a portion of critical illness needs. This is particularly relevant for those who do not draw a regular income or whose income earning occurs on a daily basis and who may not enjoy any employment benefits such as medical leave. In the event of an early stage critical illness, such people are likely to be at risk of income loss while undergoing treatment and during recuperation, said Ms Tang.

Mr Tomas Urbanec, Prudential Singapore’s chief marketing officer, pointed out that the premium rates of an early stage crisis cover may be higher as they reflect the higher probability of a claim. “The lump sum benefits from these products will cover medical expenses that the hospitalisation plan may not pay for, such as co-insurance and deductibles and reconstructive surgery unless it is medically necessary. They could also be used to pay for mortgage instalments and children’s education fees, replace loss of income, and aid in lifestyle changes to adapt to life after a critical illness,” he said.

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