A new “guaranteed to issue” critical illness insurance product that is simple in design should be easier to sell than most CI products, says John Young, president and CEO of RBC Life Insurance Co.

The essence of the simplicity is that an agent can approve a client for “base” coverage of the Edge Critical Illness Plan if he or she satisfactorily answers nine qualifying questions, says Young.

But even though advisors agree that this structure will make it easier for potential clients to understand the product, they also say the fine-print exclusions and the fact that the policy is not automatically renewable means they will not be selling it to all clients — particularly those who would qualify for a more comprehensive, guaranteed renewable policy.

RBC underwrites the product, which was designed by Newmarket, Ont.-based Edge Benefits Inc. and is sold through both companies’ distribution channels.

Its simple design is modelled after Edge’s disability insurance product, says David Prince, president of Edge, who notes that the traditional CI product can take three or four months to issue. “Many brokers don’t sell it because of the complications.”

When a prospective client passes the nine “qualifying questions” process, the advisor can guarantee that base coverage will be issued, says Prince.

The qualifying questions pertain to nine conditions that fall under the guaranteed-to-issue base coverage: cancer, heart attack, stroke, coronary artery bypass surgery, major organ donor transplant, occupational HIV (accidentally infected at work), kidney failure, aortic surgery and heart-valve replacement.

However, “builder” coverage — which covers the following additional conditions: multiple sclerosis, Alzheimer’s disease, coma, benign brain tumour, blindness, Parkinson’s disease, deafness and paralysis — can be obtained if the client files a supplemental application that will go through a normal underwriting process.

A “return of premium on death” benefit is also included in the base policy. If the client dies from a condition or event not defined as a critical illness, the premiums will be returned without interest to the client’s estate.

A return of premium benefit on the expiry of the policy — when no critical illness has occurred and no benefit has been paid or is pending — costs extra.

The available benefit amounts are $25,000, $50,000 and $75,000. Premiums are laid out in five-year bands and are set by the combination of gender, smoking status and the desired benefit amount. When premiums are paid up to age 65, the coverage will go to age 75.

“This product is excellent for the market for which it was developed — for those who may not qualify for a more traditionally underwritten policy,” says Ami Maishlish, vice president, insurance and financial, of Richmond Hill, Ont.-based CompuOffice Software Inc. , which produces insurance policy comparison software used by advisors, actuaries and insurance companies. “I believe this product will be very easy to sell.”

It does have one serious drawback, says Maishlish. Neither the policy continuation, nor the premium rates are guaranteed.

The company can’t single out any one client’s policy for cancellation or premium increases, however, although RBC could do so for a certain group of clients to which it pays out more in claims than it receives in premiums.

“Insurance should enhance certainty for clients,” says Maishlish.

Advisors point out other potential drawbacks, including the maximum payout of $75,000, which is small, and the fact that it’s only available up to age 54 — limiting the number of clients who can purchase it.

Also, the base coverage on coronary bypass surgery precludes “balloon angioplasty” and “stent placement” — two common procedures that are used instead of bypass grafts, says one advisor.

Benefits will not be payable under the base coverage heart attack provision if an attack is “noted incidentally” on an ECG. That means if a client had a minor heart attack in the past and didn’t know it, and then suffers a substantial attack and tries to make a claim, he or she will be denied coverage, says another advisor.

Coverage for multiple sclerosis, one of the top five critical illnesses, says one advisor, is only available in the “builder coverage” — meaning it has to go through the formal underwriting process.

The product has an extensive “pre-conditions” clause, but the overview states that “when builder coverage is approved and added, the pre-existing condition limitation on the base coverage is removed.”

@page_break@Thus, the base coverage is “guaranteed to issue” after successfully answering the qualifying questions, but it’s not “guaranteed issue” until a client goes through the underwriting process involved in the builder coverage. IE