In critical illness insurance, one in five claims is refused. Consumers who want to purchase such insurance find it difficult to compare policies and do not always understand the characteristics of the product they are buying.
These are some of the findings of the Autorité des marchés financiers (AMF) in its Report resulting from surveillance work in critical illness insurance, postponed to mid-December.
The organization notes the weaknesses of the industry and asks insurers to make improvements so that consumers are treated fairly.
Critical illness insurance pays compensation if the insured suffers from an illness that meets the definition and the conditions set out in the contract.
The AMF looked into this product because of its intrinsic complexity.
“There have also been complaints and certain situations which have come to light in the media and have captured the attention of the Authority”, underlines Véronique Martel, coordinator expert in the supervision and control of financial institutions.
The AMF sent information requests to 22 insurers, which represent nearly 95% of the market share, and conducted interviews with representatives of insurers.
The public report really focused on the consumer. Our goal was to demystify the product and focus all recommendations on better understanding.
Véronique Martel, expert coordinator in supervision and control at the AMF
The AMF has also sent some insurers private reports concerning the specific elements that they will have to correct.
One of the barriers consumers face is the difficulty in comparing policies written in obscure vocabulary, which can differ significantly from one insurer to another.
The AMF has listed around thirty illnesses that could be covered – or not – to varying degrees. Added to this is the opaque layer of complexity of limitations, exclusions and waiting periods.
Some numbers
Premiums written for critical illness insurance in Quebec : 510 million per year *
Total premiums in insurance of persons : 17 billion per year *
* Annual average of data published by the AMF in the annual reports on financial institutions for 2016, 2017 and 2018
Recommendations
The AMF notably asks insurers to stop confusing consumers with their documentation or advertising – its report gives the example of statistics on the prevalence of certain diseases.
“The information related to these statistics can lead consumers to believe that they have a greater probability of being covered for a particular disease, when in fact, the coverage is not necessarily identical to the statistic” , raises Véronique Martel.
The AMF report reveals that 20% of claims are refused by insurers, while a refusal rate greater than 10% should prompt an insurer to question its causes.
More than 60% of refusals are related to limitations or exclusions, medical history, non-compliance with the definition and waiting periods.
For the AMF, these data clearly demonstrate the need to transmit relevant and complete information to consumers, in accessible language. It invites insurers to create tools for this purpose.
The AMF also asks them to put in place means of communication and information after the purchase, so that the insured understands his rights and obligations better and that he can exercise them at the appropriate time.
Finally, the organization recommends that the distribution networks be better equipped to properly advise clients and facilitate the process of claiming compensation and settling disputes.
The AMF took advantage of its work to renew its information page on critical illness insurance.
“We worked with the team that enriches the Authority’s website, and we wondered what information consumers needed to purchase this product,” explains Véronique Martel.
The AMF could do better
“For me, they don’t go far enough,” says Denis Preston, lecturer at HEC Montreal in financial planning.
“We’ve known for a long time that there are problems with this product. ”
The five recommendations of the report constitute in his eyes “a minimum”. The AMF’s findings against insurers are “the tip of the iceberg,” he said.
“I would be ashamed to put on the market a product that does not work in 20% of cases”, formulates the specialist, with reference to the rate of refusal of compensation. “There isn’t a used car salesman who would survive on a rate like this. ”
While he is delighted with the overhaul of the AMF website, he would like the organization to clearly place critical illness insurance on the list of consumer insurance and savings priorities. That is to say at the very bottom.