AIA Australia, one of the nation’s largest life insurers, is responding to medical advancements to make Crisis Recovery insurance more flexible, relevant and affordable for Australians.
When Crisis Recovery was first introduced to the Australian insurance market in the 1980s, the cover was designed to support customers who experienced a crisis event – cancer, stroke or heart attack, for example, or a serious medical procedure like coronary artery angioplasty.
This principle hasn’t changed in subsequent decades: in the event of a crisis event, a customer receives a lump sum payment (their sum insured) to both relieve the financial burden of their medical condition and support them during their recovery.
Nonetheless, there can be little denying that what may be rightly considered a crisis event has changed; significant medical advancements over the years have meant that many medical conditions are no longer as serious or untreatable as they once were. Regardless, the definitions of what qualifies as a crisis event have remained the same – or even been broadened – with the result that Crisis Recovery payments are often paid out for relatively minor injuries or illnesses that have incurred negligible financial impacts.
An unfortunately common consequence of this has been increases in premiums for many Crisis Recovery customers. Sue Laing, an independent claims consultant and the founder and technical manager of Risk Store, says windfall outcomes in insurance are increasingly harder to support: “It’s been accepted that a windfall result can and does occur with some claims, if only the direct costs of the event are being measured against the benefits received. But the single sum insured design, with windfall outcomes on some events, was and is becoming harder to support as being in the best interests of the client given the increasing costs of this design’s premiums.”
Equally importantly, in some cases these payments have ended up leaving customers in a vulnerable position. Say, for example, a customer receives a Crisis Recovery payment for a comparatively minor crisis event and then, against recommendations, spends that money on a new car or holiday. In the likely event that they didn’t take out Crisis Recovery Buy-back and Reinstatement, they’ll be unable to claim further support if they go on to suffer another crisis event.
Introducing Crisis Extension
It’s in response to these concerns that AIA Australia is introducing a new product to market: Crisis Extension.
While Crisis Recovery will continue to pay out for crisis events, Crisis Extension serves as a supplementary feature customers can add to ensure they remain covered for those illnesses that are most prevalent, that generally require additional care, and that tend to create the largest financial burden.
Customers are able to set their amounts of sum insured for Crisis Recovery and Crisis Extension however they like, affording them greater flexibility and enabling them to purchase cover at lower premium rates.
The example below gives an idea of how Crisis Recovery and Crisis Extensions work independently.
Catherine, a single working mother with new household debts, meets with her financial adviser, who recommends she take out $300,000 in Crisis Recovery. To make Catherine’s cover more affordable, her adviser suggests Catherine allocates $100,000 in Crisis Recovery and $200,000 in Crisis Extension. If Catherine experiences a serious crisis event – like advanced invasive cancer, out-of-hospital cardiac arrest, chronic lung disease or many other conditions – the full $300,000 benefit of both her Crisis Extension and Crisis Recovery will execute.
Ten months after taking out her Crisis Recovery and Crisis Extension cover, a doctor finds a small melanoma on Catherine’s calf. Catherine receives a $100,000 Crisis Recovery payment, and her policy creates an auto-reinstatement of the Crisis Recovery as a $100,000 Coronary Plus benefit with an additional $10,000 partial payment in the event that another cancer develops.
Two years later, Catherine’s skin cancer has recurred and spread – she now has Stage 3 tumours in her lungs. She receives the $10,000 from her Reinstated Crisis Recovery under Cancer module, plus the $200,000 from Crisis Extension.
(N.B. If Catherine, had suffered from a minor secondary illness only payable under Crisis Recovery, this would have executed a second payment of $100,000. It would not have affected her Crisis Extension).
Extending the lines of support
Some crisis events are more serious than others, and require greater levels of support. AIA Australia is committed to offering rewarding, affordable and relevant insurance products that will protect the financial security of your clients and their loved ones if they experience a crisis event.
At a time like this, when many of your clients are likely to be facing financial difficulties, crisis cover remains vital. This initiative provides your clients with the option of maintaining their cover for major crisis events while allowing them to reduce costs, freeing up funds they may need.
Head here to find out more.
Copyright © 2020 AIA Australia Limited (ABN 79 004 837 861 AFSL 230043). This is general information only, without taking into account factors like the objectives, financial situation, needs or personal circumstances of any individual and is not intended to be financial, legal, tax, medical, nutritional, health, fitness or other advice.
