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Globally, an estimated one in nine people will develop cancer, with the incidence rate of the disease in South Africa expected to more than double from 2019 to 2030. Cancer is one of the four main illnesses that must be covered by dread disease or critical illness policies, along with heart attacks, stroke, and coronary artery bypass graft. However, despite the rising incidence of cancer and other critical illnesses, dread disease cover is not widely sold. It’s time for a radical rethink, says Kobus Wentzel, Executive Head of Sales and Distribution at 1Life Insurance. He takes a look at the value of dread disease policies and why they are so essential in a client's portfolio.
Dread disease pays out a lump sum on diagnosis of a covered critical illness. The pay-out is tax free, and policyholders can use the funds as they wish, such as for treatment, medication, therapy, home adaptations, as well as to replace any income lost while being diagnosed, treated and recovering from illness. Dread disease cover can be taken as a stand alone policy, or, in most cases, added to a life or disability cover policy.
Uptake of dread disease policies is low for a number of reasons including awareness (many clients do not know about the product), no perceived need (many clients believe medical aid and gap cover should cover the costs of treatment) and cost (perceived high premiums). Because these policies are technical in nature, with many medical definitions, they can also appear complicated with too many terms and conditions.
However, dread disease cover is even more critical today than it was 20 years ago. There are more diagnoses of dread diseases such as cancer and heart disease. A study on the prevalence of heart disease and strokes found that in Sub-Saharan Africa there was a 38% increase in coronary heart disease from 2000 to 2016 and an increase in strokes of 25% in the same period, with projected increases of 21% (coronary heart disease) and 82% (stroke) by 2030. Cancer diagnoses are also increasing, in some cases due to early diagnosis and longer life expectancies, but also changes in lifestyle such as increased alcohol use and obesity.
Treatment and care costs are not always covered in full. Medical aid and gap cover both fulfil a need, but they only cover medical costs, up to certain limits and for specified treatments. The more comprehensive medical aids offer excellent coverage, but the contributions are high and member numbers low.
How much could a dread disease cost to treat? Anything from a few thousand rands. In 2019 the hospital and rehab costs of a stroke ranged from R41 000 to R106 000. A gap cover provider reported costs for heart diseases in 2021 of R141 862. Cancer costs can range from R10 000 to R1 million, per patient per year. It’s a lot. Add in help at home costs, lost income and even transport costs to treatment facilities. It’s hard to find a source of funds for these costs other than a dread disease policy, which pays valid claims quickly on diagnosis, to ease the financial pressure and the accompanying stress.
Advisers need to swot up on the Ts and Cs of dread disease policies. Advisers need to pay attention to what diseases are covered and at what pay-out level, what constitutes a diagnosis and if there is a survival period, as well as entry age limits. Explaining these to clients will simplify the product, show how it can fill a gap in cover and ensure a dread disease diagnosis is not financially devastating.
Disclosure is really important! Dread disease claims are declined because the policy terms and conditions are not met or there has been non-disclosure. Non-disclosure is an old friend when it comes to declined claims, and as an adviser you can emphasise how important it is for your clients. It may be tempting for your client to not disclose material information in the hope it won’t be discovered. This is nothing more than the client wasting their money. Claims are individually assessed and the chances are high that any non-disclosure will be discovered.
Does your client need dread disease cover and at what age? Risk factors for dread diseases include family history, as well as lifestyle factors such as smoking. Age matters too. The median age of a cancer diagnosis in South Africa is 59 for females and 64 for males, according to a Stats SA report, however this can vary depending on the cancer. Heart attacks occur most frequently for men over age 45 and women over age 55. Strokes are also more common at older ages with two thirds occurring in people 65 years and older. Using the risk factors and age of your client, advisers can use a smart FNA, such as 1Plan from 1Life Insurance, to determine the need, appropriate cover amount and affordability.
As relevant today as it was 50 years ago
Dread disease was a world first for South Africa when it was launched in 1983. It remains relevant today, even more so than 50 years ago. The costs of a critical illness can bankrupt clients or put them into serious debt. Ensuring they have cover and access to funds from the start of care gives financial stability, empowering them and their families to get the best treatment without financial stress.