A lot of experienced and qualified  financial advisors would be of the same opinion that Financial Protection Insurance is necessary to the majority of families, either as a  safeguard in the event of premature death, prolonged illness, loss of employment (especially in the present economic climate), or cover for an accident.

Life Insurance is the foundation of all financial assurance for cover for a mortgage or to ensure a lump sum that is not taxable, in the eventuality of death. Sadly, a proportion of other Financial Protection Insurance types, do not do not have similar reliable qualities and have been branded as being miss-sold.  Also, based on what we know, critical illness cover has suffered owing to startling omissions from insurance policies making it feasible for insurers to reject many claims, as genuine as they may be.

In spite of this, some faith was reinstated when Aviva gave details on the conclusion of claims on Critical Illness Insurance policies on their half yearly statistics.

Critical Illness Insurance claims were being rejected because clients did not disclose their full medical background.  As a result Norwich Union  says that in the last five months the amount of declined claims has reduced considerably from 6.8 per cent in the last year, to 1.5%.

Why? We think, not only Legal and General but all of the life insurance companies, because of destructive public relations, have been placed in a position whereby they must diminish the number of claims that are rejected. Does this show how forceful the media can be?  Debateable perhaps – you may think we are cynical but we believe there are other issues that encouraged the insurers to make modifications. Lately, as a result of dire media, sales of Critical Illness Insurance policies  have declined which in turn has clearly impinged on the insurance company’s profit. This was probably the catalyst that promoted the change!

Scottish Provident, Friends Provident, Axa and Norwich Union have instigated some important changes purposely designed to decrease their rejection rates. To start with, they silhouette clearly that all health disclosure, however insignificant a visit to a Doctor might have been, must be includedmade known. Scottish Provident, among others will get a Doctor or Nurse to telephone every candidate to discuss all the details of their medical record. If the policy then goes on risk, some policyholders are being informed that it is essential that they provide complete health disclosure and they are allowed to add or put right any details on their application.

The insurer may then re-evaluate the risk and if it is believed to be increased the monthly payments will likely be increased – which seems more reasonable and eventually more appropriate than paying the original premium then having a claim rejected due to non-disclosure of medical records.

This action should have been put into operation by the Insurance Companies years ago as the public’s understanding of Protection Insurance has eroded by their somewhat strange approach. Without doubt, there is a clear and necessary need for protection insurance so we can hope that it is able to re-build trust and then the popularity it rightfully merits. 

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Think about this question ‘Could you afford to pay your monthly financial commitments if illness prevented you from working?’ A large proportion of us would say ‘No’. So without doubt we need to consider taking out insurance against unpredictable events. A typical critical illness policy would settle a tax free lump sum if the insurance policy holder is diagnosed with a potentially life threatening illness. The lump sum can be used in numerous ways. For instance, you could pay off your mortgage, make alterations to your home to accommodate a wheelchair, or simply settle your bills.

The coming months will see a big price rise, so if you haven’t got any insurance cover at the moment, now is the time to sign up. The cost of life cover has come down over the past 12 years. There are various reasons why this has happened. First of all the Aids epidemic, that was expected in 1980-1985 never occurred and secondly the recovery rate of those undergoing heart attacks and cancer has radically improved. These facts have allowed insurers. Protection insurance is regularly reviewed by Insurance Companies, when the number of claims for certain conditions are examined. Following such a review Norwich Union will be amending payments shortly, with the cost of life cover dropping slightly and the premiums for critical illness insurance cover going up. The Insurance Company is unable to say by how much, as the client’s situation and the sum covered fluctuate from person to person, but the increase should not be huge is predicting that there could be a rise of between 30 and 50 per cent in critical illness insurance premiums in the next few months. It also fears that guaranted premiums may either become unaffordable for many, or even cease to exist as a result of the unsound marketplace.

Swiss Re has said that it will not underwrite critical insurance policies from the end of the year as the cover is costing them too much.

The cost of insurance has been put up by two major insurance companies.  A twenty to twenty five per cent risehas recently been broadcast by Scottish Equitable and Prudential. Nevertheless this is very little compared to the unbelievable price increases written into the covers now offered by Friends Provident and BUPA, which fluctuate between 50 to 60%.

It is plain that this trend will be followed by other re-insurers. Fixed rates where the monthly price is held for a specific period, typically ten years, may no longer be offered by insurersInsurance Companies.  In future, paymentswill be reviewed annually, just like motor and home insurance. The outlay for the customer will be much more in the long term. The message is crystal clear. Critical illness cover is becoming more costly so purchase it now to benefit from guaranteed rates and the moderately low premiums being givenat present. Let us wish that you will never have to claim, but statistics indicate that unfortunately many of us will.

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