Critical Illness Insurance in the U.S. - Should Policies Pay for Sudden Cardiac Death?
The short answer - it depends! Here’s why…
Critical Illness insurance was originally developed by Dr. Marius Barnard to help individuals afford the costs of surviving a critical illness. While a 30-day survival requirement is the standard in most countries, this has not been the practice in the U.S. Without a survival period, payment may be expected if a death due to a covered illness occurs. Sudden deaths and deaths that occur outside of a hospital may be more subjective. Whereas it is highly unlikely that a sudden death will occur as a result of most eligible benefit triggers, it would not be uncommon to receive claims for sudden death under the “Heart Attack” trigger.
We all have a rough idea of what a heart attack is. But does the definition change depending on who you ask? We are constantly analyzing and revising our Critical Illness (CI) insurance definitions so that they are objective, clear, and understandable to the consumers. However, this is easier said than done. Does the typical person on the street understand what “a diagnostic increase of specific cardiac markers” or “new electrocardiographic changes indicative of infarction” means? If an insured dies suddenly, and the death certificate lists “Heart Attack” or another more vague cause of death, will the family expect payment?
There are two potential challenges here, the first being that many cardiac or cardiovascular conditions are generalized by the public. For example, an arrhythmia is not the same as a heart attack, and heart disease or failure does not necessarily have anything to do with a heart attack. Coronary Heart Disease causes most heart attacks, but can also lead to death via an arrhythmia and cannot therefore be used to prove that a heart attack has occurred upon death. To further complicate this issue, about 350,000 sudden cardiac deaths occur each year and even more sudden deaths in total.1 Although some policies may have wording that either directly or indirectly excludes payment for death, denying sudden cardiac death claims carries obvious legal and reputational risks. Some carriers reserve the right to autopsy to confirm cause of death, but given the delay in reporting CI claims, the expense of an autopsy, and the potential emotional distress to the family, this would be impractical in most cases.
How can insurers overcome these challenges? Gen Re has done extensive research of hospital records, death records, surveillance studies, government statistics and more, to come up with our best estimates of the quantitative impact of including sudden cardiac death in a CI policy. Through the research process, we have come to realize that the numbers for heart attacks, coronary artery disease, and sudden cardiac deaths are all intertwined.
Let’s look at the math. Assume that the product was originally priced solely for hospitalized heart attacks, and that heart attacks make up 12.5% of our total CI incidence rates. Additionally, let’s assume that we have priced for a 50% loss ratio. If our intent is to now cover sudden heart attack death without hospitalization, any sudden cardiac deaths and any fatal coronary heart disease cases, this could increase our “Heart Attack” claim costs by as much as 68%, and increase the total premiums by 8.5%. Needless to say, this alone could entirely wipe out a company's margins if not carefully considered and factored into both pricing and claims adjudication practices.
It is important to understand that, when it comes to payment for sudden cardiac death, there is no simple right or wrong approach. That being said, when claim practices deviate from the original pricing and intention of any insurance product, carriers may face substantial risk in terms of both profit and establishment of precedent. When developing and pricing a CI insurance product, it is imperative that all areas of risk are in agreement as to the language and intent of such coverage.
1. Zipes, Douglas P. and Hein J.J. Wellens. "Sudden Cardiac Death." Circulation, AHA. 1998.