Traditional versus Severity Based CI Cover
Of late a lot of debate has been generated on the types of illness policy in the market. The new concept which is hogging the limelight is whether severity based insurance cover is better than the traditional approach. In the traditional life insurance policies you are paid compensation for various illnesses, without going onto the severity of the illness. There may be times when the severity of the illness is not so grave as to warrant a full payment, so the severity based cover can be useful in these circumstances. A client can get some compensation instead of getting none at all.
Though a lot of interest has been generated in this concept, only one company Pru Protect has come forward to offer a severity based product to the clients. Most of the companies are sitting on the fence and following a wait and watch policy. They are waiting to see the success of this policy and ready to enter the scene should a positive response emerge.
There are some issues with the severity based policies which need to be answered to make it totally attractive and transparent. The main problem in critical illness insurance is about subjectivity. It is still not clear as to who will decide on the severity. It may lead to more wrangling and disputes. Most customers would certainly desire simplicity and certainty rather than a cumbersome procedure. To get it going, fixed definitions have to be put in place.