Solution 7.12

Hi all,

Don't quite understand the concept behind solution 7.12 on page 37 of chapter 7

"If insured has been sick for lengthy period e.g. 2 years, then policy may revert to less stringent definition based on being able to do any job, rather than the job he/she was doing immediately before the current period of sickness. At this stage the insurer may encourage the insured to retrain for a new job, perhaps offering financial support for this training."

Why would that help? Wouldn’t that lengthen the claim duration as claim definition is “more easily” fulfilled?

Thanks,

 

Yes, the wording looks a little ambiguous

I think the point is that the effect of changing the criteria will mean that certain events that would have triggered before the change may no longer do so when assessing the trigger against the more generic (less strict) definition.

The policyholder could therefore have their benefits cut to zero despite being off for the same (unchanged) reason.

Hope that helps.

Encouraging the insured to retrain would ensure that their income didn't drop to zero.

 

So it's saying that in the first two years, the claim definition was "unable to do own occupation" - and depending on the occupation, there could be many reasons why you can't do your own occupation. For example a surgeon might be prevented from working if he/she breaks a finger.

Then after two years, the insurer changes the claim definition to "unable to do any occupation" and you'd really need to be severely incapacitated for this to hold. A broken finger certainly wouldn't count as that doesn't stop you doing most jobs. Even far worse things, like being unable to walk / lift things don't stop you working in an office (generally). So this is classed as a less stringent claim definition and it would mean that individuals who'd been claiming for two years might suddenly have to go back to work (in a different occupation, hence the retraining!).

So no - I don't think the claim definition is more easily fulfilled with an "any occupation" definition - it's the other way round

 

Thanks Mugono and Charlie.

I think I understand the intention of the insurer now - it's to change the definition so that the insured has to go back to work to shorten the claim duration.

But perhaps it should be called "more stringent" because it's "harder" to claim on the newer definition compared to the old one?