CI debate flares up again in the Talvest Town Hall

(July 25, 2003) The Talvest Town Hall was home to continued debate over the merits of critical illness insurance. After almost a month of silence on the issue, CI suddenly became the hot topic for debate again.

Several postings claimed that CI was little more than a premium grab since it was too difficult to qualify for coverage if you had a family history of critical illnesses.

One participant asked whether it made sense to add CI coverage, saying that most critical illnesses do not surface until late in life.

“What if the vast majority of people who develop one of the major illnesses do so in old age, say past age 75?” asked Gary. “If you add a return of premium and hold the policy to the qualifying time, you get your premiums back — but in future dollars. So if you’re 35, 45, 55 or even 65 that’s a lot less money back in real dollars.

“If you have no ROP and you get tired of paying premiums so you cancel by, say age 65, you may have paid for coverage for an illness with a very low probability of occurring. Point is, an average is an almost meaningless statistic. The real relevant information is probability based on age.”

Gary went on to say that if the insurance industry had stats to back up the argument in favour of CI, the figures would be far more readily available. He said that you’re far more likely to trip on the street, so why not offer insurance against a broken nose suffered from such a mishap.

This line of reasoning really brought the debate to a head.

Laurie pointed out that diseases like cancer often strike in the prime of life, relating the story of two speakers at the Advocis Okanagan School.

“We had 2 young married professionals speak on their experiences since he was diagnosed with Adult Acute Leukoblastic Leukemia last year at age 31. Their topic was ‘To Hell and Back — the importance of critical illness coverage’. I am sure they would be astounded to discover some in our profession equating their experience with a broken nose. One of the comments the wife made was ‘we met lots of people who went bankrupt.'”

Brad Brain said that too many arguments against CI were based on theoretical arguments without statistics backing them up.

“Go ahead and find something tangible that says people don’t get cancer, or that when they do get cancer they don’t run the risk of having all of the things that they have worked hard for during their lifetime go down the toilet,” Brad Brain challenged.

In the end, Gary suggested that the best approach on CI was to offer the client as much data on the subject and let them decide for themselves.

“Give consumers their options, let them decide. But give them the likelihood of risks, so they can make ‘informed’ decisions,” he said. “I do believe in testing the validity of insurance products because there is an inherent bias called profits that need to be counterbalanced, to protect consumers.”

There are plenty of other topics open for discussion in the Talvest Town Hall, from advisors’ views on Assante to regulatory debate, so feel free to visit the forum and share your views.

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Share your thoughts on CI, regulations or any other topic concerning the advisor community in the “Free For All” forum of the Talvest Town Hall on Advisor.ca.

Filed by Steven Lamb, Advisor.ca slamb@rmpublishing.com

(07/25/03)

The opinions expressed in the online messages posted to any of the forums of the Talvest Town Hall are strictly those of the participants and do not necessarily reflect the views and opinions of the staff of Talvest Fund Management, Advisor.ca or Rogers Media. Material contained in the Talvest Town Hall forums is for information purposes only.

Steven Lamb