Despite the fact that critical illness cover plays a pivotal role in protecting South Africans against unforeseen health shocks, it accounts for only 3% of the group risk premium in the insurance market. This has led product providers to rethink such cover, which is often a grudge purchase for healthy people.

The need is urgent as cancer cases are expected to increase by 77% by 2050, according to the World Health Organization. Additionally, obesity – a complex chronic disease – affects one in eight people worldwide and causes health conditions such as heart disease, stroke and type 2 diabetes.

Critical illness cover should be a vital component of financial planning, but only 580 000 people in South Africa have this type of cover. This means that most of the population is underinsured for a major health event.

Low uptake is partly due to the complexity of existing products, which are not especially affordable and difficult to compare to others, says Tanya Rossouw, Head of Customer Engagement: Group Assurance at Old Mutual Group. With this in mind, Old Mutual is rolling out a new suite of products that can offer significant benefits at affordable prices.

Here's what you can expect from the products and what they can offer your clients.

Critical Incidents Cover

Critical incidents cover – also known as dread disease cover, living assurance, or severe illness cover – pays a lump sum when the insured experiences a specified critical event, such as a listed illness, injury or medical procedure.

Old Mutual’s Critical Incidents Cover can be an accelerator to Group Life Assurance Cover or taken up as a freestanding product, and will be offered by employers, not retirement funds. Maximum cover is the lowest of three times the individual’s annual salary, R3 million, or the member’s unapproved Group Life Assurance Cover (if it is accelerator cover).

Note that the Critical Incidents Cover stops on retirement or when the individual reaches 65, but conversion options are available to allow for continuation of cover.

Four product options to suit every pocket

These include:

• Cancer Protect
• Essential
• Comprehensive Plus
• Extensive Plus

Cancer Protect

As the name indicates, this cost-effective option covers cancer only – a useful product as cancer is a leading cause of death globally and accounts for nearly one in six deaths. The most common cancers are breast, lung, colon and rectum, and prostate cancers.

“Cancer is the leading cause of claims, accounting for around 50% of all claims under critical illness benefits,” Rossouw notes. She adds that Cancer Protect is a cost-effective entry-level option that provides comprehensive cancer protection.

Essential

This product covers eight critical events that make up more than 70% of all critical incidents claims, including cancer, stroke, heart attack and coronary artery bypass graft (CABG) procedures.

Comprehensive Plus
This product covers 38 conditions, including the most common major critical illnesses, but also less common severe conditions that include paralysis, dementia, Parkinson’s disease, trauma, loss of sight or hearing, transplants and accidental HIV.

Extensive Plus

This product covers all 38 critical events under Comprehensive Plus as well as Activities of Daily Living (ADL), which is a catch-all event meant to cover non-listed accidents and medical conditions that may still have significant and permanent impact on the insured person’s ability to perform their day-to-day activities.

How claims work

Rossouw says it’s possible for an insured person to claim more than once from their Critical Incidents Cover, but benefits will depend on whether they have a standalone cover or if their cover is linked to any other insurance policy (such as accelerator cover). It also depends on whether the critical event for which they claim is related to a previous claim.

If your client has standalone cover, they will need to survive for at least 10 days without life support after suffering specific critical events or severe illnesses, for example, a stroke or heart attack, paralysis, major burns, or a coma. This survival period separates Critical Incident Cover from death claims.

A survival period does not apply if your client has accelerator cover. There is a standard 24-month waiting period for claims on pre-existing conditions before and after joining the scheme.

The payout process

Benefits are paid out as a lump sum, calculated as a multiple of the individual’s annual salary. The payouts are tiered and based on the severity of the member’s condition, which makes the product more affordable for many.

The severity rating is as follows:

A = Most Severe

B = Moderate Impairment

C = Mild Impairment

D = Least Severe

For example, if your client’s cancer is judged to have caused mild impairment only, the payout could be 50% of the sum assured. If your client has suffered accidental brain injury that is judged to have caused moderate impairment, the payout could be 75% of the sum assured.

As mentioned, multiple claims are possible.

For standalone critical incidents (which don’t reduce group life benefits), it’s possible to claim for up to 100% of the sum assured in total for related claims. For unrelated claims, each set of unrelated claims has a limit of 100% sum assured. For example, your client could claim 100% of the sum assured for cancer and 100% for a stroke.

For accelerated critical incidents, multiple claims are permitted until the member receives 100% of the sum assured, at which point cover ceases. For example, if the member has Stage 3 prostate cancer that’s considered to have caused mild impairment (severity C), the payout is 50% of the sum assured. If the member then has a stroke with moderate impairment (severity B), a payout of 75% would be applicable for that level of severity. However, since the member is limited to 100% of the sum assured, the remaining 50% of the sum assured would be paid to the member and then the cover would cease.

Rossouw notes that Critical Incidents Cover isn’t available to Superfund Choice clients at this time, although they can make use of the existing Lifestyle Cover product.

She adds that the product is not sold at retail level, as this would drive the costs up, making it less affordable than a compulsory product.

For more detailed information, read our Critical Incidents Cover brochure.