When life hap­pens

RISKAFRICA Magazine - - CONTENTS - An­ton Pre­to­rius and Hanna Barry

Crit­i­cal­i­cal ill­ness, such as can­cer,cer, can touch even the health­i­estlth­i­est of peo­ple. When life hap­pens, in­sur­ance can carry the as­tro­nom­i­cal med­i­caldical costs and pro­vide sup­port­port for the af­ter­math. How­ever,wever, de­cid­ing which type of crit­i­cal­rit­i­cal ill­ness cover is most suit­ableable for your client and en­suringur­ing that the in­sur­ance com­pa­nympany has no grounds on whichch to void a claim, can proveve chal­leng­ing.

The first crit­i­cal ill­ness in­sur­ance prod­uct was launched in 1983 in South Africa and is now used world­wide. Dr Mar­ius Barnard, brother of world-renowned heart sur­geon Chris­ti­aan Barnard, be­came frus­trated watch­ing pa­tients’ fi­nan­cial strug­gles and de­signed a prod­uct that pro­vides a lump sum pay­ment to a pol­i­cy­holder older fac­ing can­cer, a heart at­tack, stroke and a range of other dis­eases s that vary by con­tract. It can also pro­vide the fi­nan­cial means to pay for the trauma coun­selling that so many pa­tients face as a re­sult of bat­tling a crit­i­cal ill­ness.

Ac­cord­ing to the South African De­pres­sion and Anx­i­ety Group, be­tween 20 and 30 per cent of all can­cer pa­tients are di­ag­nosed with de­pres­sion. This makes it twice as hard to cope with per­form­ing ev­ery­day tasks. It is times like th­ese that a risk ben­e­fit, which gives pa­tients ac­cess to ex­cel­lent med­i­cal as­sis­tance, can prove in­valu­able. Ma­jor ex­penses are an added weight on your client’s shoul­ders and make re­cov­ery that much harder. Ian van der Walt, bro­ker man­ager at Mo­men­tum Namibia, says that the in­surer does not fo­cus only on the ‘big four’, i.e. can­cer, heart at­tacks, strokes and coro­nary artery by-pass grafts (CABG), but be­lieves in breadth of cover. There is an on­go­ing de­bate over whether tiered or com­pre­hen­sive crit­i­cal ill­ness cover is prefer­able. Many life in­sur­ance com­pa­nies ar­gue that it’s im­por­tant to have 100 per cent cover at mild sever­ity lev­els of the crit­i­cal ill­ness. If your client suf­fers from can­cer for in­stance, it is of­ten when the most ag­gres­sive chemo­ther­apy treat­ment is ap­plied to the

Should your client de­velop an early stage of dis­ease, a ben­e­fit com­men­su­rate with the ef­fect on their life­style would be paid out, leav­ing the re­main­der of the ben­e­fit in­tact. Should the ill­ness worsen, a fur­ther ben­e­fit would be payable. This al­lows for fur­ther claims for more se­ri­ous ill­nesses rather than pay­ing out the whole ben­e­fit im­me­di­ately and leav­ing noth­ing should an­other claim arise. The re­main­ing ben­e­fit is there­fore in­tact and con­tin­ues to grow with ben­e­fit in­creases ev­ery year. The up­side of this is that lower pay outs for lower sever­ity ill­nesses pre­vent an in­ci­dent in which large pay outs are made for an ill­ness from which a per­son may make a full re­cov­ery and there­fore not re­quire such a large lump sum on di­ag­no­sis.

Be­yond the bibig four

“Our stud­ies re­veal that 40 per cent of claims in South­ern Africa are out­side the big four, so that is the rea­son why Mo­men­tum of­fers a broader spec­trum of cover,” says Van der Walt. Th­ese in­clude ill­nesses such as con­nec­tive tis­sue dis­ease; mus­cu­loskele­tal, gas­troin­testi­nal and res­pi­ra­tory dis­or­ders; ac­ci­den­tal HIV/Aids; ma­jor burns; vis­ual im­pair­ment; and trauma.

How­ever, fig­ures quote the big four as mak­ing up be­tween 70 and 90 per cent of all crit­i­cal ill­ness claims in Africa. In 2008, th­ese ill­nesses made up 93 per cent of Old Mu­tual Namibia’s crit­i­cal ill­ness claims. Gim Vic­tor, chief ex­ec­u­tive of­fi­cer of Old Mu­tual Life As­sur­ance Com­pany in Namibia, says that the in­surer’s Green­light Care 4U risk prod­uct does not dif­fer­en­ti­ate be­tween mild and more se­vere ill­nesses, ac­knowl­edg­ing that any crit­i­cal ill­ness needs 100 per cent cover. Ac­cord­ingly, this risk prod­uct pays out 100 per cent at all sever­ity lev­els for the four core ill­nesses.

Old Mu­tual’s Green­light of­fers core and com­pre­hen­sive op­tions on its se­vere ill­ness ben­e­fit. The se­vere ill­ness (core) ben­e­fit cov­ers the most com­mon se­vere ill­nesses at 100 per cent of the cover amount. The se­vere ill­ness (com­pre­hen­sive) ben­e­fit cov­ers the core events, plus a com­pre­hen­sive list of se­vere ill­nesses at 100 per cent of the cover amount. In ad­di­tion, it of­fers sup­port cen­tres that con­nect clients with a net­work of as­sis­tance.

Tiered vs. com­com­pre­hen­sive cover

mildest form of the dis­ease that the chance of sur­vival is great­est. Com­pre­hen­sive treat­ment of the dis­ease in the early stages is more likely to pre­vent it from pro­gress­ing fur­ther. How­ever, the flip­side of this is that tiered cover may be more af­ford­able and of­fers at least some cover, rather than none at all.

In Old Mu­tual’s case, while com­pre­hen­sive cover is gen­er­ally pre­ferred by clients, af­ford­abil­ity con­sid­er­a­tions do make some cus­tomers pre­fer the core cover op­tion. Both of­fer 100 per cent cover at all times, but the core op­tion cov­ers the big four only. Vic­tor says, “It is in­ter­est­ing to note that the ill­nesses cov­ered un­der the core ben­e­fit col­lec­tively ac­count for 89 per cent of all Green­light se­vere ill­ness claims, which en­sures that even un­der a tiered ben­e­fit, a cus­tomer is cov­ered for most of the se­vere ill­ness events.”

Rather than pay­ing out 100 per cent of the cover on di­ag­no­sis and al­low­ing the client to in­vest the money as they choose, tiered cover leaves the client’s money with the in­surer. Tiered ben­e­fits typ­i­cally pay be­tween 25 and 100 per cent, de­pend­ing on the sever­ity level of the ill­ness. For ex­am­ple, most tiered ben­e­fits pay 25 per cent for a level D heart at­tack, can­cer and stroke; level D be­ing the least se­vere level of ill­ness.

Mo­men­tum’s ben­e­fits are struc­tured as tiered. Van der Walt says that from a cost per­spec­tive, tiered cover makes more sense to both the pol­i­cy­holder and the in­surer. “Tiered ben­e­fits mean that the claim amount paid is based on the sever­ity of the event. Ben­e­fits do not nec­es­sar­ily fall away af­ter the first crit­i­cal ill­ness claim. Mul­ti­ple claims are there­fore pos­si­ble,” says Van der Walt.

How­ever, it could be ar­gued that com­pre­hen­sive cover of­fers clients greater peace of mind and sig­nif­i­cant re­source when they need it most.

Our stud­ies­dies re­veal ththat 40 per cent of claim­saims in South­ern Africa are out­side the big four, so that is the rea­son why Mo­men­tum of­fers a broader spec­trum of cover.

A client may fail to re­veal some­thing about their med­i­cal his­tory or their fam­ily’s med­i­cal his­tory.

Re­jected claims and the ad­viser’s role

To rec­om­mend the right cover, a bro­ker or fi­nan­cial ad­viser must as­sess their client care­fully, as risks vary from con­sumer to con­sumer. If your client has a fam­ily his­tory of heart dis­ease, for in­stance, look at what is cov­ered for heart at­tacks. In terms of life­style, if your client is over­weight, a smoker and un­fit, they are at risk of heart dis­ease and a stroke. It is all about es­tab­lish­ing where your client’s main risk lies and what cover is avail­able for that. When it comes to claim­ing, ex­clu­sion and non-dis­clo­sure are the two pri­mary rea­sons for non-pay­ment by in­sur­ance com­pa­nies. A client may try to claim for a ben­e­fit that was ex­cluded up­front at the un­der­writ­ing stage. For in­stance, if the client has had can­cer be­fore tak­ing out crit­i­cal ill­ness cover, can­cer may be ex­cluded in their par­tic­u­lar pol­icy. Ad­vis­ers must make their clients aware of this.

Ill­nesses caus­ing func­tional im­pair­ment, such as Parkinson’s and Alzheimer’s, can also cause non-pay­ment. The di­ag­no­sis of such ill­nesses is made only once the con­di­tion is viewed as per­ma­nent and ir­re­versible, which is of­ten at an ad­vanced stage of the dis­ease. The prob­lem is that func­tional im­pair­ment can­not be mea­sured be­fore the con­di­tion has been op­ti­mally treated and sta­bilised and it can be said with­out doubt that no fur­ther im­prove­ment is ex­pected. How­ever, many pa­tients re­alise this only at claims stage and have to wait un­til their func­tional im­pair­ment has reached the level as de­fined in their par­tic­u­lar crit­i­cal ill­ness pol­icy be­fore they are paid out.

Non-dis­clo­sure is one of the most com­mon rea­sons for non­pay­ment. A client may fail to re­veal some­thing about their med­i­cal his­tory or their fam­ily’s med­i­cal his­tory. Al­ter­na­tively, clients may not think that a seem­ingly ba­nal piece of in­for­ma­tion, such as that they are tak­ing blood pres­sure tablets for in­stance, can make a big dif­fer­ence to how their po­ten­tial risk is as­sessed. It is crit­i­cal that fi­nan­cial ad­vis­ers ask as many of the right ques­tions as they need to, and en­sure that clients un­der­stand the ques­tions clearly and an­swer them truth­fully.

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