Total Permanent Disability will not be scrapped

Total Permanent Disability (TPD) will not be scrapped from critical illness insurance policies, the Association of British Insurers (ABI) has announced.

The ABI originally proposed to remove the clause from members' policies and replace it with a set of carefully worded definitions. However, stakeholders who responded to a consultation, launched in September, were divided over the wisdom of such a move, with half rejecting it.

"We would have needed it to be unanimous to ban TPD," said Nick Kirwan, the ABI's assistant director for health and protection. "Nobody thought there was an absolutely perfect answer, but we want to find a way to make it better."

The ABI is holding a workshop this month to thrash out eight different options for reform. These include: a standardised TPD clause, possibly with back problems and mental health (conditions responsible for a high proportion of TPD claims) "carved out", a task-based definition, a hybrid of critical illness and income protection insurance  and a severity-based tiered payment structure.

Kirwan said that another short consultation would follow this discussion.

Attendees at a recent protection seminar held by Medicals Direct questioned the future of critical illness insurance, suggesting that claims under the TPD clause highlighted the need for a hybrid critical illness / income protection proposition.

Kirwan defended critical illness as "the most successful new product launched in the last 50 years".

While just 3% of critical illness claims are made for TPD, 55% of these are declined and disputes about it account for 35% of complaints about critical illness made to the Financial Ombudsman Service.

Back to all Health Insurance Articles