Critical illness: Quebec’s regulator demands that insurers take corrective measures

One out of five (20 per cent) critical illness claims is denied by insurers. Given this high rate, Quebec’s regulator, the Autorité des marchés financiers (AMF),is urging the industry to take corrective measures to offer people who buy these products better tools and information.

In a report published in December 2021, the AMF painted a portrait of this sector based on information gathered from 22 insurers. It finds that critical illness insurance premiums totalled nearly $510 million on average each year in Quebec in 2016, 2017 and 2018. CI accounts for approximately 3 per cent of the total premiums written annually by Quebec insurers for all their life and health insurance products.

Overall, more than 30 illnesses are covered by these policies, the AMF adds, but the actual coverage varies considerably. Some insurers cover only the most common illnesses, such as life-threatening cancer, myocardial infarction and stroke. The illnesses covered and their characteristics differ between products, between insurers and even for the same insurer, which makes it difficult for consumers to compare the choices offered.

High denial rate  

The AMF thinks that a denial rate higher than 10 per cent should raise questions among insurers and prompt them to delve into the causes. The current denial rate for CI is 20 percent. “Insurers should determine whether this level jeopardizes the fair treatment of consumers and, if so, take appropriate measures to correct the situation,” it says.

The top three conditions that were denied by insurers were cancer (65 per cent), heart attack (13 per cent) and stroke (9 per cent). More than 60 per cent of these denials were related to limitations or exclusions, pre-existing conditions, failure to meet the definition, and survival and waiting periods. About five per cent of the insureds whose claims were denied requested a review. In more than 80 per cent of these cases, the insurers upheld their decision.

The proportion of claim denials and the reasons given clearly indicate that consumers need relevant and complete information before and at the time of purchase to enable them to make an informed decision about the product, the regulator says.

Better explanations of reasons for denial  

The AMF also mentions gaps in the treatment and settlement processes. The organization insists that the reasons for denial must be clearly explained to the insured. Consumers must know why their file does not meet the definition of the illness stated in the contract or the reasons for applying a limitation or exclusion. Clients should not have to consult their physician to understand the technical terms of their insurance policy or denial letter.

Use of statistics and slogans  

In addition, the AMF highlights industry practices such as the use of statistics and slogans in consumer literature. “The definition and characteristics stated in the contract are often more restrictive than the statistics presented,” the regulator points out. As for slogans, they should not create confusion among consumers or misunderstanding about the coverage offered. In particular, consumers should not be given the impression that the scope of coverage is broader than it actually is.

Tools to help consumers  

The AMF outlines a series of actions and measures that insurers should take to better explain these products, such as tools, guides, glossaries and frequently asked questions. If the policy is purchased from a representative, that representative has a series of obligations and responsibilities, including the obligation to inquire about insureds' situation in order to identify their needs and offer an appropriate product, the AMF adds.

The agency believes that support after the purchase of critical illness insurance is also needed to help insureds better understand their rights, which may include, depending on the coverage chosen or offered: Return of premiums when no claim has been submitted to the insurers during the coverage period; conversion of the contract, for example into a long-term care insurance contract at a certain age, such as 65; and renewal conditions for contracts.

Consumers’ obligations  

Post-purchase support should also help policy holders better understand their obligations, the AMF continues. For example, insured must report to the insurer certain events within the time limits stated in the contract, such as a cancer diagnosis within the waiting period. When such declarations are received, some insurers offer insured the following two choices: Cancel the coverage with a refund of the premiums paid, or maintain the coverage for illnesses other than those covered by the diagnosis, with no adjustment of premium.

The AMF also calls on insurers to improve their training programs and provide appropriate reference tools to enable their distribution networks to fully assume their responsibilities and role in supporting and advising their clients.

In its report, the regulator states its intention to follow up on the CI-related action plans submitted by insurers. It will also continue to monitor the evolution of practices in this sector and will take “appropriate measures when required.”