Brokers Ireland & ClearChoice Specified Illness Cover Workshop April 2018 1
Specified Illness Cover Workshops & Guidance Paper | The Why! ● 100 Illnesses! ● Yes and Partial ● Older SI contracts versus new SI contracts ● Level of detail is frightening! ● Fact-finding process ● Selling on the number of illnesses a Life Company may offer ● Compliance issues ● Pricing environment 2
Specified Illness Cover Workshops & Guidance Paper | The Why! ● Professional Opinion/House View ● Protecting your advice process utilising ClearChoice ● Using a client’s personal experiences | Rheumatoid Arthritis example ● Upcoming ClearChoice report around SIC ● Legal opinion states that every adviser offering Specified Illness cover advice must have a reasonable working knowledge of SIC ● Issues around Claim Statistics from various Life Companies ● Commonality needed in their representation for Financial Brokers 3
Specified Illness Cover Workshop| Agenda 9.30 a. m Factfinding & Needs Analysis 9.45 a .m Researching Specified Illness Cover 10.10 a.m What to consider when advising 10.20 a.m Claims information and analysis criteria 11.00 a.m Specified Illness Cover & Income Protection 11.10 a.m Future Trends & issues 4
Specified Illness Cover | The Challenges ● Financial Brokers are; ● Apprehensive about selling Specified Illness Cover ● Have had claims/potential advice liability issues ● Have had claims rejected due to various issues including explanation and limitations of Specified Illness Cover ● Have stopped selling Specified Illness Cover altogether ● Are not comfortable positioning the product & need a process/structure ● Know they are not medical professionals, yet there are now 100 Illness definitions* as of March 2018 across the 6 providers 5
Workshop Objectives ● The objectives are to give you guidance on; ● Developing a structured process for advising on Specified Illness Cover with a client ● Context of the product and what its purpose is for a client ● The factors to consider within the fact-finding & recommendation process including; ● Client engagement & research ● How to explain the value & benefits ● Premiums & Sums Insured Product Structure ● ● How to better interpret Specified Illness Cover terminology & definitions ● Understanding claims statistics & probabilities with the information available International experiences & trends ● 6
Specified Illness Cover | An introduction ● Specified Illness Cover has greatly evolved since its introduction to the Irish Protection market in the late 1980’s. Specified Illness Cover was conceived by a Dr. Marius Bernard in the early 1980’s as a surgeon in South Africa, whereby he saw the damage that financial hardship could inflict on a patient that survives. ● In 1983 the first three illnesses were; ● Cancer ● Heart Attack ● Stroke ● http://www.thejournal.ie/cancer-rates-ireland- 3682415-Nov2017/ 7
Specified Illness Cover | The concept Specified Illness Cover is the only Protection product that is driven by cause, not effect. I.E the cause of a Life death claim or Income Protection claim is focused on the outcome, not the cause. Whereas it is the opposite with Specified Illness Cover. It is important to remember this through the Specified Illness Cover recommendation process. 8
Specified Illness Cover | The Policies! When advising or discussing Specified Illness Cover, it is common that there be a heavy focus on the illness definitions and what these are, including how many illnesses are covered . ● Illness definitions and their payable amount are not the only aspect of a Specified Illness Cover policy that must be addressed when advising. ● Features such as the below are all key to a recommendation for a client; ● Term ● Conversion options ● Maximum ages of entry of a contract ● What is the maximum age a client can convert a policy ● Ancillary benefits such as Childrens benefits 9
Policy Description Specified Illness Cover ● As noted above, the presentation of advice is crucial with respect to Specified Illness Cover. It is imperative that the word “ Specified ” is utilised in any materials or content around this product and its recommendations. ● There are variations in this industry in what it is labelled, these include; ● Serious Illness Cover ● Critical Illness Cover ● Trauma Cover ● Ill Health Cover These descriptions are misleading to a client. These terms infer a broad meaning, i.e that once seriously ill that there will be a payment on a policy should the client attempt to claim . 10
Legal Precedents for adviser descriptions of Specified Illness Cover Geoghegan V Financial Services Ombudsman(FSO) ● In 2008 the appelants husband was diagnosed as suffering from cardiomyopathy, they subsequently submitted a claim on the “Critical Illness Benefit” policy in 2009. Upon application, the claim was declined by the insurer. This denial of claim was predicated on the basis that their definition of ‘heart attack’ on the policy did not included cardiomyopathy. ● The couple claimed that they believed that this policy would cover them for all manner of ‘serious illnesses’ under the policy, and not specific definitions. The couple claimed that they were in essence mis-sold this policy at the point of sale and that they were not informed that specific illness criteria applied to any illness such as heart attack or cancer. 11
Issues around the Presentation of Specified Illness Cover ● Financial Brokers are often presented with comparative analysis of what each companies will and will not covered across the 6 Life Offices and the relevant Specified Illness Cover definition. ● It is often presented in a simplified format of Yes or No or Partial ● This is misleading & must not be presented to a client in isolation. A simplified “Yes” to a Heart Attack definition is not a Yes, it is a Yes with the Specified Illness definition criteria with each respective Life Office that must be presented to a client at some stage for their own consumption. 12
Section 1.Factfinding & Needs Analysis | Protection Section ● Specified Illness Cover is a living Life benefit that is sometimes stated as the alternative to Income Protection. This is not the case and it can be complementary to Income Protection, as well as an excellent solution in itself in covering a client for illness/injury. ● There is no set specific calculator/recommendation level for a client for Specified Illness Cover currently in place in the Life & Pensions industry. A frequent rule of thumb for the calculation of a Specified Illness Cover sum insured amount is 2 x times a persons salary i.e to cover them if out of work for up to 2 years. 13
Section 1.Factfinding & Needs Analysis | Protection Section ● This, when considering taxation at current levels, would work out at almost 4 x times net salary or 4 years covered. ● When advising, this may be off-putting to a client when recommending Specified Illness Cover as; ● It may become too expensive a premium at this sum assured of 4 years net salary 14
Section 1.Factfinding & Needs Analysis | Protection Section Partial Payment Issue The limitations of Partial Payments, capped at €15,000 to €20,000, should also be considered when recommending a lump sum insured. The Partial Payments that have come on stream in recent times are not obscure or unlikely medical events. ● In recent years there has been a proliferation of listed claim definitions that are categorised as “Partial Payments”. ● These potential claims are illnesses/injury that are related to full payments in many instances, but are designed to be for less severe claims ● The Partial Payments are designed for areas of illness such as Carcinoma in Situs ( Cancer that has developed in one specific part of the body), Angioplasty, one & two vessels etc 15
Section 1.Factfinding & Needs Analysis | Protection Section Partial Payment Issue ● These developments in partial payments must also be taken into account when assessing your recommendation lump sum insured amount for a client ● i.e. a person taking out €175,000 when there is an increasing likelihood that any claim they make may only be a partial, which is capped at €15,000/€20,000 at current 2018 levels, may not represent good value for a client ● A lower sum insured may be more appropriate, with money re-channeled into other financial products such as Life or Income Protection, pensions, savings etc. 16
Section 1.Factfinding & Needs Analysis | Protection Section Partial Payment Issue ● Partial Payments have added a layer of complexity for an adviser when recommending Specified Illness Cover: Financial Brokers are not medical professionals. ● Distinguishing between ‘partial’ and ‘full’ payments of various illnesses is becoming increasingly difficult. It is therefore essential that a Financial Broker presents their advice and contractual information on Specified Illness Cover to a client in a format that is both presentable to them as clients and protective of the limits of advice a person can give on Specified Illness Cover. 17
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