The definition of “critical illness” in life insurance policies is set to change from August 26, 2020.
The Life Insurance Association (LIA) of Singapore announced the changes to the definitions are to take into account the advances in medical treatment and technology which may impact how certain critical illnesses can be treated, managed or mitigated.
For instance, “Deafness (Loss of Hearing)” will be amended to “Deafness (Irreversible Loss of Hearing)”, with the term “irreversible” defined to recognise the possibility of future medical treatments that can restore hearing to some level as medical advances are made.
Another example would be the critical illness “Heart Attack of Specified Severity”. The reference to “Death of heart muscle due to obstruction of blood flow” will be revised to “Death of heart muscle due to ischaemia” to make it clear that both Type 1 Myocardial Infarction and Type 2 Myocardial Infarction are covered.
Policyholders with existing critical illness policies are not impacted by the new definitions, said the LIA Singapore on Thursday, 26 August, when it announced the changes.
All critical illness products based on definitions used from 2014, when the last update was done, may no longer be sold in Singapore from Aug 26 next year.
All member companies of LIA Singapore and the General Insurance Association of Singapore will adopt the new standardised set of revised definitions.
“Especially with the rapidly ageing population and rising incidences of chronic illnesses here, regular reviews of the critical illnesses definitions will ensure that critical illnesses products stay relevant with changing times, and that the intended scope of coverage is clear to consumers,” said Mr Khor Hock Seng, president of LIA Singapore.
What is critical illness insurance?
Critical illness insurance pays a lump sum if you’re diagnosed with a critical illness (see list of 37 critical illnesses covered below) or after having undergone a type of surgery covered by the policy.
Key features include:
- Payment of lump sum if you are diagnosed with an illness covered by the policy. Or after first having a type of surgery covered by the policy.
- Benefits are paid only if the illness or surgery meets the definition stated in the policy.
- There is usually a waiting period for specific illnesses or types of surgery. If any illness is diagnosed or a type of surgery is carried out during the waiting period, no benefits will be paid.
- Some critical illness policies pay a smaller amount for earlier stages of cancer, or make several payments upon diagnosis of different insured critical illnesses, subject to the sum insured or policy limits.
Five most common critical illnesses in Singapore
This is not the first time the LIA of Singapore has reviewed the definition of critical illnesses. In the last update in 2014, many of the 37 severe stage critical illness definitions were revised. Then, it also removed the maximum limit of 30 medical conditions per critical illnesses plan to allow for more medical conditions to be covered.
Over 90 per cent of all severe stage claims received by life insurers in Singapore are for the following five critical illnesses:
- major cancer
- heart attack of specified severity
- stroke with permanent neurological deficit
- coronary artery bypass surgery
- end-stage kidney failure
List of 37 critical illness conditions
The following is the industry list of 37 critical illness conditions. (Refer to this document for revised updated to the standard definitions).
- Major Cancer
- Heart Attack of Specified Severity
- Stroke with Permanent Neurological Deficit
- Coronary Artery By-pass Surgery
- End Stage Kidney Failure
- Irreversible Aplastic Anaemia
- End Stage Lung Disease
- End Stage Liver Failure
- Deafness (Irreversible Loss of Hearing)
- Open Chest Heart Valve Surgery
- Irreversible Loss of Speech
- Major Burns
- Major Organ / Bone Marrow Transplantation
- Multiple Sclerosis
- Muscular Dystrophy
- Idiopathic Parkinson’s Disease
- Open Chest Surgery to Aorta
- Alzheimer’s Disease / Severe Dementia
- Fulminant Hepatitis
- Motor Neurone Disease
- Primary Pulmonary Hypertension
- HIV Due to Blood Transfusion and Occupationally Acquired HIV
- Benign Brain Tumour
- Severe Encephalitis
- Severe Bacterial Meningitis
- Angioplasty & Other Invasive Treatment for Coronary Artery
- Blindness (Irreversible Loss of Sight)
- Major Head Trauma
- Paralysis (Irreversible Loss of Use of Limbs)
- Terminal Illness
- Progressive Scleroderma
- Persistent Vegetative State (Apallic Syndrome)
- Systemic Lupus Erythematosus with Lupus Nephritis
- Other Serious Coronary Artery Disease
- Loss of Independent Existence
Singaporeans lack critical illness cover: study
In a study published last year, the LIA said adult Singaporeans are worryingly short of critical illness cover.
A working adult in Singapore has critical illness cover of just $60,000, well under the LIA recommendation of about $316,000 which translates to about 3.9 times the average annual pay of $81,663.
That means life insurance policies with critical illness coverage would meet just 20 per cent or so of their needs if such illnesses occur.
LIA advised that people need coverage to provide for family needs during the assumed recovery period of five years for a critical illness or until the insured person can return to work or adjust his lifestyle needs.
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