I’ve recently been sent a great piece from Gen Re on heart attack definitions. At the start of what is a pretty through review of the use of different diagnostic techniques they ask some great questions which bear repeating:
Although medical definitions are part of an insurance contract, suggesting an absolute meaning, the insurer’s claims philosophy must address questions such as, “What is intended to be covered?” or “Is the condition covered even if not all claims criteria are fully met?”
This should be contrasted with a media which has a taste for black and white declarations on the subject, such as recent articles which talk about ‘…using “out-dated” medical definitions in their
Trauma (Critical Illness) policies” that was a quote from the Australian media, but it happens that Rob Stock wrote about this very issue in an article published this morning (at this link).
In their review Gen Re talk about the value of being clear about what is intended to be covered. In doing so they talk about impact, impairment and loss: all reaching back to a concept that should be behind every insurance, the principle of indemnity. Put another way, insurance shouldn’t be a kind of lottery where a small heart attack could trigger a financial ‘win’. In order to have affordable products which can protect us all from real losses we need to have payments that broadly match impacts. So Gen re suggests that insurance wordings may never match the terms used by medical staff, and that perhaps they never should. That is why I am not in favour of a general ban on some more restrictive conditions, but I am in favour of clear communication of what we mean by each definition, in terms that at least most people reading the document can understand (see my post at this link). Indeed, there are many circumstances in which having a tough definition is preferable: one is when you want to reduce cost, another is when you only want a payment triggered by a serious event (such as shareholder protection). But whatever the wording, if an insurance definition differs from a medical term the customer should know how and why. To prevent ‘scandals’ the customer probably need to know that before they buy, not right after they claim. The challenge is that when buying the cover, clients are rarely that interested.