October 11, 2016
The Financial Services Council has released draft minimum standard trauma definitions as part of the official launch of its Life Insurance Code of Practice today.
The three main trauma definitions of heart attack, stroke and cancer have had standard definitions drafted, according to the FSC, ‘…as a possible solution to recent market issues.’ The Council has stressed that these are suggestions only and they have yet to secure industry agreement.
In its release, the FSC has documented four objectives in seeking to adopt minimum standard medical definitions for these three key trauma events. They are:
- To provide standard definitions that all life insurers who are bound by the Life Insurance Code of Practice must meet as a minimum when assessing critical illness/trauma claims for the three major medical conditions that make up the majority of claims
- To ensure that the standard definitions reflect current medical tests and practices
- To educate consumers in understanding what their critical illness or trauma policy covers and improve consumer confidence in their critical illness/trauma policy
- To provide consistent labelling across products to assist with comparisons and consumer understanding
The notes attaching to the draft definitions point out the difference between clinical and insurance definitions of these three events, where the insurance definition generally takes into account the severity of the condition and the impact of relevant treatment, as this is likely to reflect the recovery time and financial impact of the condition.
FSC CEO, Sally Loane, said that after the consultation period, during which time the FSC will be seeking the input of external medical specialists, the definitions will be submitted to the Australian Competition and Consumer Commission for approval.
The target date for the introduction of these minimum standard definitions has been set for policies purchased on or after 1 July 2017, where the terminology life companies include in their product disclosure statements when using the minimum standard definitions must be described as:
- Cancer – excluding early stage cancers
- Severe heart attack – measured by specific tests
- Stroke – resulting in permanent impairment
The FSC notes these definitions are minimum standards that would apply to the three conditions and that life companies are free to offer additional cover by including other conditions or definitions that pay out on less severe conditions than contained in the standard definitions, and that any additional benefit over the minimum standard must be clearly described in the product disclosure documents.
Click here to access the FSC’s draft minimum standard medical definitions for heart attack, stroke and cancer.