On Monday 2nd October, the Financial Conduct Authority (FCA) published its ‘Review of terminal illness benefits within life insurance protection products’. Full details of the background to the review, who it applies to and how the work was conducted can be found at the link below:

FCA Review of terminal illness benefits within life insurance protection products

SCOR welcomes this review by the FCA for a number of reasons; most importantly we agree that Terminal Illness benefit is a valuable addition to life insurance policies for customers. We also agree that while the industry is not routinely delivering poor customer outcomes as shown by the low proportion of declined claims reported in the Review, there are opportunities for insurers to deliver improved outcomes for vulnerable customers by improving the product, reviewing claims processes and providing good guidance to insurance professionals and customers through education and training.

Rethinking Terminal Illness

The Review highlights issues that SCOR have raised and shared with our clients and the industry over the past two or three years in particular, and it raises additional questions that we believe need to be considered at industry level to ensure that the benefit continues to deliver good outcomes and can be improved to meet the needs of more customers.The Review concludes that there are opportunities for life insurers to deliver improved customer outcomes for what is an inherently vulnerable group of customers. We feel in particular that the FCA have in their conclusion, drawn attention to two very important issues:

• “Insurers with terminal illness policy wordings that state it will make a claim decision based on the opinion of a treating consultant only should consider whether their actual claim process reflects the policy wording. Where firms believe a change should be made to their claims process, they should also consider the impact on existing and previous policies and customers.” 
   
• “Insurers should review the suitability of policy terms which prohibit terminal illness claims in the last 12 months of the policy (or similar period). Such terms can give rise to a potential foreseeable harm for instance where a customer may have a qualifying terminal illness but cannot access the benefit. Insurers retaining such terms should have a clear basis for how these are consistent with the delivery of good outcomes under the Consumer Duty, including experience-based evidence as to the extent of potential harm to customers.”

The Future of Terminal Illness – SCOR’s view 

Building on work first completed as early as 2015 when we began to review the scope of cover under the product, SCOR conducted its own market review of Terminal Illness in 2021 asking our clients to share their view of the product, problems with claims processes and views on how it could be improved. Our 2023 Expert View Terminal Illness Explored was an opportunity to develop our thoughts further around some of the survey findings and explore potential solutions. Through our work, we highlighted many of the issues addressed by the FCA and proposed potential solutions which may assist in the development of a benefit/product that may better align to customer expectation and understanding of the benefit and lead to improved customer experience. 

We considered some potential solutions to address the need for change. One potential solution is renaming the benefit to provide a clear message to consumers regarding the intention of TI benefit. Insurers will have their own view on an appropriate name that reflects the intention.

Another is changing the required life expectancy criteria to allow treating consultants to make a judgment on life expectancy when no further treatment options are available or there has been a relapse of the disease. Finally, retaining specific medical conditions in the definition wording for TI benefit may be a pragmatic way to provide more certainty to customers suffering from those conditions. 

We acknowledged that the future of TI really requires claims assessors to consider:

The severity of the diagnosis and its emotional impact – A policyholder could still be in shock after hearing the diagnosis from their doctor or physician. It is an emotional time, and responses to our consumers should always be empathetic to their individual needs.

The customer’s expectations - A policyholder is facing death much earlier than expected and is uncertain how to plan for it. Therefore, policyholders may need guidance on how to claim and who else to speak to (e.g., a financial advisor to help them plan for their family’s or loved one’s future).

The customer’s emotions – As they have just received a terminal diagnosis, a policyholder is very likely to be anxious, stressed and uncertain and may need additional support from or direction to other health service professionals.

That’s why we warmly welcome the FCA Review and are pleased to note that the Association of British Insurers (ABI) have now established a Working Group to consider these issues and many more to improve the product and experience for the benefit of vulnerable customers.

Our Chief Underwriter, Phil Cleverley will sit on this Working Group as the industry collectively seeks to tackle the issues and improve outcomes.