Pru combines illness cover

Posted by Marcus Ashby on June 19, 2010 Leave a comment (0) Go to comments

By Josephine Cumbo

Individuals can now make savings on critical illness insurance (CII) and private medical insurance (PMI) thanks to a new product that combines both types of cover.

CII pays a cash lump sum on the diagnosis of a range of strictly defined illnesses, most often heart attack, stroke and cancer – and, up until now, it was sold separately to PMI.

But PruProtect is now offering Serious Illness Cover – a new type of CII that pays out according to the severity of an illness – and enabling policyholders to integrate Pru’s PMI cover at a discount of up to 25 per cent.

This combined “Health Cover Optimiser” policy allows policyholders to take benefits in the form of cash or healthcare. “They can either take the lump sum from the Serious Illness Cover, and not receive any private medical treatment, or take a smaller lump sum, and use the rest to pay for medical treatment,” explained PruHealth.

“This provides greater flexibility at the point of claim and – by cutting out the overlap between the covers – the Health Cover Optimiser means policyholders only pay for the cover they need”.

PruHealth’s product development comes as competitors increase the range of conditions they will cover under CII, or widen their illness definitions to reduce the number of declined claims.

Many are also switching to the severity-based payment model pioneered by PruHealth – which is seen as more customer friendly as it is more likely to pay out.

But industry observers said Pru’s “holistic approach to protection with the Optimiser had been taken to the next level”.

“The plan already covers a wide range of serious illnesses and now it also covers the cost of a range of medical treatments,” said Ben Heffer, analyst for Defaqto, the independent financial research company.

However, PMI brokers expressed concern that the integrated policy would be unnecessarily complex.

“It is not clear to me yet how claiming on one product will affect premiums on the other the product,” said Mike Izzard, chairman of the Association of Medical Insurance Intermediaries (AMII). “These things need to be considered. I am not convinced that this is better overall for the PMI customer.”

Advisers say that when buying a policy, consumers should compare benefits and excesses – and check for exclusions for pre- existing medical conditions.