Critical Illness Disclosure to be Standardized

May 7 - The South African Financial Services Board, as well as the Competition Commission, have given insurance companies in the country the go ahead to standardize disclosures to their policy holders regarding when dread disease payouts will take place.

The move was made to benefit those people looking for a life insurance product and were finding it difficult to compare products because of a lack of standardization regarding critical illness payouts.

"Unfortunately, the nature of critical illness insurance products makes it impossible to simplify them completely, but we acknowledge that the absence of standard industry disclosures and definitions has made it difficult for consumers to compare these products and understand when claims will be paid by the insurer," said Peter Dempsey, the Deputy Chief Executive Officer of the Association for Savings and Investment South Africa (ASISA).

Critical illness insurance is essentially designed to pay a policyholder out in the event of a serious disease or in unexpected medical cases. However, the complexity of the medical world and the ambiguity of the many types of diseases and conditions have meant that no standardization could take place until now.

The changes mean that from September this year, a disclosure grid will be provided by all insurance companies offering critical illness insurance, where it will be shown in table form just what type of percentage of payouts policyholders would benefit from in the case of disease or illness.

With up to 90% of all critical illness claims coming from four major sources (stroke, cancer, heart attack and coronary artery by pass), the grid will feature the payout percentage of these.

"It needs to be strongly emphasized that standardized definitions do not necessarily mean simpler definitions," said Dempsy. "In many instances, the definitions are more detailed, but will lead to greater consistency in the decisions taken by insurers on whether to pay a benefit or not."