You say, “tom-ay-to”; i say, “Tom-ah-to.” We mean the same thing; we’re just saying it differently. The situation is the same, it appears, with the definitions of conditions covered in critical illness insurance contracts.

The variations in the terminologies used in CI policy definitions have sparked a debate about whether the industry should adopt standardized definitions. Some perceive the differences from contract to contract as obstacles to training, sales and advisor acceptance. The companies that offer the policies, however, say most definitions — essentially — say the same thing.

But the subtle differences appear to be creating confusion among advisors. While most advisors admit the differences aren’t that significant, they worry that they may be selling the “wrong” definition.

Frank Rood, a partner with Mitchell Sandham Financial Services in Toronto, shows clients a comparison of definitions. He prepares a spreadsheet comparing the definitions of six key covered conditions.

“There’s no real difference,” Rood says. “There are minute differences and slightly different nuances.” He would like to see standardized definitions because it is “hard to compare apples to apples. It’s hard to analyse the tiny nuances with no medical background. Standardized definitions would make CI easier to sell because there would be full transparency, so a layman could understand what he or she got.”

Simplicity in definitions is really what advisors are looking for. Because they have little or no medical training, they are looking for consistency in definitions that are written in plain, simple language. “If definitions are standardized, we can make an easy comparison and the contract is easy for the client to understand and to make a decision,” says Mukesh Shah, who operates a home-based advisory practice in Toronto.

The perceived differences in the definitions have caused some consternation among advisors. If a client has a heart attack, for instance, what is the difference between cardiac markers, cardiac enzymes and cardiac biochemical markers? For cancer, how many people are affected by the difference between 0.70 millimetres and 1.0 mm in the depth of invasive cancer?

“We’re asking for a definition that is agreed upon and paid for by each insurer. It’s that simple,” says Alphonso Franco, president of the Critical Illness Insurance Centre in Victoria and founder of the World Critical Illness Insurance Conference (Jan. 25-27 in Victoria). “This way, consumers can clearly understand heart attack, cancer and stroke. It would provide a common way of describing illness and diagnosis, so there would be no second thought.”

The perceived differences in the definitions also fuel fears that claims will vary from carrier to carrier. The result has been a hesitation to sell CI.

“Clients aren’t concerned with the exact wording of the definitions,” says Fay Gordon, a financial advisor who runs a Toronto-based practice. “The companies are complicating the product and playing with words. We don’t know if we’re selling the right words to our clients. We just want to know that the companies are going to pay at the end of the day.”

The concern surrounding the interpretation of definitions and what they actually mean is a significant problem among advisors, says Tim Landry, director of living benefits at MSA Financial, a Montreal-based managing general agent: “The real issue isn’t a significant difference in definitions anymore; they’re sufficiently close in key points. The perception is that so many companies are still competing on ‘my definitions are better than yours.’ Advisors are afraid of selling a product that won’t pay, when another company would.”

That’s not the case, say the reinsurers and insurance companies. The industry is committed to paying legitimate claims, they say, and advisors shouldn’t be too focused on the definitions. They believe the industry is very close to having standardized definitions now.

Advisors have long pointed to Britain as an example of a country in which standardized definitions have been implemented with success — that is, increased sales. However, Britain has minimum standardized definitions, in which certain wording must be included in the definitions and the insurance companies have the option to enhance a definition if they choose. The Association of British Insurers has a mechanism for updating the definitions every three years after extensive consultations with the insurers, the medical community and advisors. It also has an ombudsman who handles client complaints.

“We should not be comparing the situation in Canada to that in Britain,” says Hélène Michaud, director of marketing at Toronto-based Munich Reinsurance Co. of Canada. Munich, the primary company for CI reinsurance in Canada, has spent a tremendous amount of time and effort preparing for its entry into the Canadian market on order to avoid some of the challenges that other countries have faced. “In general, definitions closely resemble each other,” Michaud says. “If we define ‘standardized’ definitions as a minimum standard that each definition should meet, then the definitions of CI conditions in Canada are already standardized.”

@page_break@Gary Mooney, vice president of business development at Toronto-based Optimum Reassurance Inc. and president of actuarial and marketing consulting firm Actel Resources Inc. , says advisors may not recognize definitions as being “essentially equivalent.”

Mooney acknowledges that there is some confusion among advisors about definitions, and he says Optimum would like to see companies use exactly the same words.

But insurers say that the definitions are, for the most part, standardized. “Insurance companies recognize that the definitions are essentially the same,” says John Parker, assistant vice president of living benefits products and marketing at Manulife Financial Corp. in Toronto. “We also recognize the complexity of definitions.”

Would minimum standardized definitions reduce the perceived complexities? “If we adopted the British model, with its enhancements, we would be trading one issue for another,” says Tami Dietrich, manager of marketing services at Waterloo, Ont.-based Equitable Life Co. of Canada. “It could be perceived to be more confusing than now. Definitions are very similar now.” She contends that companies might end up competing based on the enhancements to covered condition definitions, which would not solve the issues surrounding definitions.

As well, insurers say, they need the flexibility to modify definitions to keep up with medical advancements in testing and diagnostics. Standardized definitions could severely limit this ability. Currently, definitions may be updated when new treaties or premium changes are instituted. Standardized definitions probably would require a more formalized process — full industry consultations, for example — and that could be onerous and time-consuming.

“Medical science is the driver,” says Jacques Potvin, assistant vice president of marketing at Industrial Alliance Insurance and Financial Services in Quebec City. “There’s always new medical information and new things to learn.”

Insurers would also like to see advisors shift away from putting contract definitions under a microscope and focus more on clients’ needs and providing solutions.

“Product selection shouldn’t be based on definitions,” says Sean Long, health products consultant with Desjardins Sécurité Financier in Toronto. “Products have similar wording. A client’s decision to purchase will be based on an agent’s service and reliability. We need to get back to selling the need.”

Parker believes that the industry has to try new things and new innovations to improve CI sales: “The industry needs to look at ways to make the product more accessible.”

Insurers agree that more advisor training and education are crucial to the success of CI insurance and improved sales. “The most important thing is to train advisors as an industry,” says Potvin. “Education is key.”

Most advisors agree. When CI was first launched, insurers focused their marketing efforts on the number and definitions of covered conditions. They gave little attention to needs analysis or the purpose of the product, and the result has been flat sales for the past few years. Something needs to change to reinvigorate sales growth. Insurers now recognize that they did a poor job of educating advisors, and that concept and needs are the right way to sell CI.

“The companies have not done a good job in training agents,” says Franco. “Sales would be better if we had clear definitions, explaining what’s covered and what’s not. And then we can focus on need.”

While consistent definitions probably would not impact product pricing (claims have more influence on premiums), it might play a role in effective marketing.

Many advisors say that standardizing definitions would not take away a company’s competitive edge. They believe that having confidence in the definitions would allow them to focus on the rest of the policy contract and to find the right solution for their clients’ needs. Companies could then compete on the other benefits and features of their plans, including underwriting practices, claims processes, speediness of payment and customer service.

The implementation of standardized definitions is not on the insurers’ agenda. There’s no concerted push to introduce them, nor does there seem to be a willingness to pull together as an industry with the medical profession and advisors to reach a consensus on definitions.

The challenge for the companies, then, is to convince MGAs and advisors that the current sets of definitions are essentially the same, so advisors would not have concerns about selling any available product.

Landry believes the key to increasing CI sales isn’t really in solving the mystery of definitions; it’s in providing advisors with service and training and giving them “a remuneration system that rewards consistent high-level production, persistency and good claims ratios.”

Advisors are almost unanimous in their call for simplicity and improved training. The insurers assert that that’s what they’re beginning to deliver. They could both be saying the same thing.

Tom-ay-to. Tom-ah-to. IE