Guaranteed medical cover policy wordings
Jon-Paul Hale on the future security of insurance cover, unacceptable levels of risk for clients and sneaky exclusions to be wary of.
Tuesday, February 23rd 2021, 6:09AM 
4 Comments
I've talked about this before, and I'm not sure that the point has been digested particularly well.
And I've had a lightbulb moment about perspective on this. Let me unpack it for you.
Guaranteed wordings on medical cover ... ho-hum for the most part from the providers. Mostly about "we don't get the point of restricting innovation with policies as they evolve and change".
Before nib came out and guaranteed their Ultimate Health Max wording, I had an excellent discussion with the late Peter Harrison about this. He got it, not from the medical perspective but from the life perspective. And that will make many go, huh?
I get the point of the medical insurance people. We have medical cover, it has had a 30 day right to review and change the wordings forever, so this guarantee thing is just foreign.
And while we talk about medical cover and the innovation and change associated with it, I understand the head scratch.
Except the adviser advising on this is a life adviser. And we have an entirely different view.
The point of the guaranteed wording on the medical cover isn't so much about the medical cover as it is more specifically about the unfunded medicines coverage, restricted to cancer or not.
And to be quite frank, when we talk guarantees on medical we're talking about not being able to take away cover. We haven't said anything about not allowing improvements.
This is how passbook works, and I've talked about that in a previous article. If you don't understand it go read that.
And the medical people are still going, so?
I get that. Now the change of viewpoint, look at this from the life advice perspective.
As a life insurance adviser, when I'm looking at risk, I'm looking at all the issues, not just medical treatment access. Debt, loss of income, and unexpected medical costs being only a few.
In the past, we have had medical policies that don't cover unfunded medicines, ever since they started to appear in 2001 on a more regular basis with Herceptin for breast cancer.
As a life adviser, this is a significant financial risk that the average Kiwi household doesn't have the access to resources to pay for. So what's the answer?
Traditionally it has been trauma. Lots of trauma.
But trauma has an Achilles' heel – cost. Especially once you get over 50, it gets expensive.
The second issue is that it is a one-hit-wonder. It pays for the event and then it's done.
Except it has one thing all life insurance has, a guarantee. Or more specifically, the law says once a policyholder has cover in place, the insurer cannot change the terms and conditions of that cover to be worse than when it was issued.
Subject to paying the premiums and not having been fraudulently obtained.
And it is this perspective we life advisers are banging on about.
As an adviser, we talk certainty of outcomes for clients in adverse situations. Security of cover is a core fundamental of this position.
So when we look to advise a medical cover, covering unfunded medicines for this particular risk, we are trading the certainty of trauma cover with the hope of medical coverage if it is not guaranteed and has a 30 day right to review clause.
As a life adviser, this is a risk that is just unacceptable.
To place a client in a position where they could have the cover pulled after they have developed conditions preventing a move to another provider, or worse pulled just as they need the cover to respond to their diagnosis and treatment, is unacceptable as a risk management position.
The more extreme of this is the new Southern Cross cover, Cancer Cover Plus. Not only does this have the 30 day clause in it, so does AIA and Accuro in this space, they also have a very very nasty exclusion buried in there too.
As the Cancer Cover Plus is a rider benefit to the Southern Cross medical coverage, the medical cover has the Cancer Cover Plus policy wording on this baked in.
What's the issue: exclusion of family history of cancer in relation to Cancer Cover Plus; which is not an underwriting exclusion for existing family history. It is an exclusion at claim time if the cancer being claimed for is familial – ie the policyholder is claiming for breast cancer when mum has had breast cancer where mum's breast cancer was diagnosed after the policyholder took cover.
In my opinion, this is the nastiest exclusion I have seen in 20 years!
And people look at us life advisers like we're a bit unhinged on this subject.
The issue of unfunded medicines cover being pulled outlined here may never happen, and talking to the various bods around the medical insurance industry this is what they are suggesting.
The challenge here is in trusting those statements when we know the issue is not only possible but has been acted upon in the past.
I know large medical claims can and do impact medical premiums. You get multiples of these per year, and medical insurers will be increasing premiums. It is an issue granted.
However, as an adviser, the security of that cover I advise into my client's future is my paramount concern. I have no idea what is around the corner. The people involved today at the insurers will likely be somewhere else when that cover is called on to respond.
That's a pretty hairy issue to trust to "they won't do that" when there is a 30 day right to review the whole policy's terms.
Come on providers; you want to build trust in your products and brand, step up with guarantees written into your policy wordings that the cover today will be no worse than the cover tomorrow.
That is putting the client first!
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I missed the highlight on half of the sentence being a defined term in the glossary rather than a highlight of the situation for emphasis.
"Family history of cancer" is a defined glossary term in the wording as is "Cancer Cover Plus"
Which leaves the words "in relation to" being the only non-glossary words in the wording.
If I am to include the full related wording the exclusion becomes:
"Family history of cancer means where the policyholder or dependant has two or more natural parents or siblings (living or dead) that have been diagnosed with colorectal and/or breast and/or ovarian and/or prostate cancer before the age of 55 years in relation to:
(a) the policyholder and each dependant named in the application, before the date that the policyholder applied for Cancer Cover Plus; and
(b) any dependant added to the policy after the date that the policyholder applied for Cancer Cover Plus, before the date the relevant dependant was added to the policy; where the policyholder or the dependant was aware, or ought reasonably to have been aware of such diagnosis.
in relation to
Cancer Cover Plus means Chemotherapy 100 and Chemotherapy 300, the optional upgrades available for the chemotherapy for cancer benefit. The options are more particularly described in Section 06."
This changes the perspective on this significantly... But is an easy one to overlook when half the sentence is a glossary definition.
And it seems across the industry with not a single comment about it.
Proving my point about guaranteed policy wording and the need for policy security!
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I get this, that's what we would normally see with underwriting, however, the suggestion by the person at SX is that once underwriting is done the exclusions don't apply. There is a basic failure of logic in the explanation I received.
I'm quite happy with the position that the intention is to exclude family history cancers at underwriting and not capture this after the policy is issued. That would be what any reasonable adviser would expect.
The problem is the policy wording does not say that.
The exclusion says: Family history of cancer in relation to Cancer Cover Plus;
It is pretty clear that cancer claims, where there is a family history of cancer, are excluded. It doesn't limit it to the specific cancer of the claimant, which means the wording could have a wide interpretation to mean dad's prostate cancer precludes the daughter from being paid for breast cancer. Yes, I am taking that to the ridiculous to make my point.
Happy to be corrected on this, but it seems that the person/people at SX making there call on this don't understand what they are talking about, and that concerns me when it comes to product and cover security for clients.
What say you?