The Association of British Insurers (ABI) has announced it has agreed to introduce a standard definition for Total and Permanent Disability into the UK market in 2011.
In early 2011, the ABI will issue an updated Statement of Best Practice for Critical Illness Insurance that will contain the details of the new standard TPD definition, which will be required to be included in all member insurance company products when they next update their Critical Illness policies.
a standard set of TPD definitions is intended to improve clarity and understanding … and also to reduce the number of TPD claims that are declined
The ABI says it has taken this step following extensive industry consultation and consumer research. The introduction of a standard set of TPD definitions is intended to improve clarity and understanding of the TPD definition and also to reduce the number of TPD claims that are declined.
While the current proposal relates to standardising TPD definitions only within Critical Illness policies, there is an expectation in the UK that the life insurance market may well adopt standard TPD definitions for stand alone policies as well. The argument is that because most providers of stand alone TPD also offer Critical Illness cover, it would not make sense for them to use different definitions of TPD depending on how it is offered.
ABI Assistant Director, Health & Protection, Nick Kirwan, said that in exploring ways to help make claiming TPD easier for customers, the Association considered changing the name of the benefit:
“However, customer research did not strongly support this idea. After careful consideration we have now agreed standard definitions, training packs for advisers, an online hub of information and much clearer steps for customers which we believe will make the process easier and increase successful valid claims,” said Mr Kirwan.
In the 2011 Statement, the ABI advises the term Total Permanent Disability will remain but will be extended to make the scope of the cover much clearer, meaning that its intended education programme can apply to both new and existing policies to make the most difference in helping to reduce the proportion of declined claims.
The ABI notes that in the UK, Total and Permanent Disablement accounts for only 3% of Critical Illness claims, but 55% of these claims are declined due to a lack of consumer understanding about when they are eligible to make a claim.
The ABI therefore sees standard TPD definitions, more descriptive headings and customer education leading to improved understanding and a reduction in the proportion of denied TPD claims.
