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Time to rebrand trauma: IFSO

Rebranding trauma insurance as “critical illness cover” across the board would clear up confusion among consumers, the Insurance and Financial Services Ombudsman says.

Friday, June 23rd 2017, 6:00AM 4 Comments

by Susan Edmunds

Karen Stevens said her office had received complaints from people who thought their policies should have paid out simply because they suffered a traumatic event.

"It's really unfortunate that trauma insurance was ever called trauma insurance," she said. "Most don't understand what it means."

One man complained that the diagnosis of his kidney tumour and the surgery to remove it had been very traumatic. Therefore, he said, his insurer should pay his trauma claim. However, his tumour was found to be benign, and the trauma policy only covered life-threatening cancer, including “the presence of one of more malignant tumours".

“Although the complainant’s experience was indeed traumatic, and we understand that, there was no evidence of malignancy,” Stevens said. “It was outside the policy cover, so there was nothing we could do to give the complainant the outcome he wanted.”

In another 2016 complaint, a claimant suffered a heart attack, but his trauma insurance claim was declined, because the medical diagnosis did not meet the policy definition of a “heart attack”.

The diagnosis was for congestive heart failure and dilated cardiomyopathy.  While the complainant’s heart was weaker, his heart attack had not caused a portion of his heart muscle to die, as was required by the policy. His condition was, therefore, outside the policy cover and the insurer was entitled to decline the claim. 

Stevens said advisers could be doing more to educate their clients but renaming the cover "critical illness", as some insurers already have, would be a bigger help.

“The policy might cover 12 or it might cover 20 things but then everyone knows if they have one of those specific things they’re covered and if not they aren’t covered. As opposed to calling it trauma which people understand as you’re covered for any trauma.”

Naomi Ballantyne, managing director of Partners Life, said clients and advisers needed to do enough research before buying a policy to make sure they were covered for the things they wanted cover for.

She said people often tried to get their circumstances to fit the requirements of a policy to claim because they realised they needed the money it would provide.

But she said often they discovered that they should have bought a different type of policy. “Trauma is not income protection.”

Tags: Partners Life Trauma

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Comments from our readers

On 23 June 2017 at 11:00 am Tash said:
Sorry Karen Stevens but changing the name would have made no difference at all in the cases used as examples, both of which being entirely capable of being considered 'critical illnesses' the those suffering them.
On 23 June 2017 at 1:09 pm HumbleAFA said:
Agree, policies/benefits should be named and marketed based on how they perform.

There are some so called trauma covers on the market that should more aptly be named “Terminal Conditions Cover” and not marketed/named anything close to other trauma type covers available (especially with the same insurer). Some have wordings so “Severe” they are only marginally better than having life cover!

Good on those insurers who already name policies/benefits in accordance to how they perform.
On 23 June 2017 at 4:46 pm Referee said:
Actually I disagree because there are a number of conditions that do not relate to "illness", e.g. paralysis, loss of sight, hearing, speech, limbs, burns, etc., to name a few. These are "physical" trauma events.
On 29 June 2017 at 5:12 pm Aurora said:
I think trauma/critical illness cover could reasonably be considered the most complicated insurance policy in the market today in terms of hitting its intended mark. From numbers of conditions covered, definitions, thresholds, partial payments, severity based and multi payment options. I mean the insurance companies have been involved in something akin to a nuclear arms race to create the biggest and best. This makes any recommendation an absolute minefield and without addressing each and every condition in a policy the door is then wide open for the legal prosecution that may follow a declined claim. How many limitations does everyone include in their SOA's I would be very interested in the feedback!

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