James Daley: Health cover companies sell us short

Being diagnosed with a chronic or critical illness is one of the most harrowing experiences life has to offer. So imagine how it feels when you've just been told you have cancer or HIV and your insurer tells you it won't pay up on your private medical cover or critical illness policy.

You are directed to sub-clause four of paragraph 372 of the small print, and it emerges that you've got the wrong type of cancer. Your policy only covers tumours located below the knee, and payments will only be made to cover treatment for the first four days, after which you're on your own.

As absurd as it sounds, this kind of practice still takes place, and while insurers and brokers are now regulated, cleaning up the industry and ensuring customers are treated fairly has been a slow process.

It's two years since the charity Cancer Backup first gave some profile to this issue - carrying out an extensive mystery shopping exercise to get a handle on the harsh realities of the private medical insurance market. It discovered that of the largest insurers only Bupa would pay up for cancer sufferers throughout the course of their illness. Most health insurance policies only cover any immediate treatment needed after the patient is diagnosed. However, any longer-term care or treatment, such as chemotherapy or hormone replacement are usually excluded.

The scandal here is not that most insurers don't want to provide long-term cover for people with chronic illnesses - after all, these are businesses not charities - it is that many insurers and brokers simply don't make it clear to customers what is and is not covered by their policy at the time they sign up. Although Cancer Backup, along with Macmillan Cancer Support, has been working with the industry to improve sales practices and simplify jargon, little real progress has been made in the two years since its report.

By and large, people are relatively fit and healthy at the time they take out critical illness or private medical cover. Getting cancer may well be the last thing on their mind. Which is why it is imperative that their policy's exclusions are spelt out to them before they sign.

This week, the Association of British Insurers (ABI) took a small step in the right direction, updating its statement of best practice for those who sell and design private medical cover. The good news is that the trade body now advises all those who sell these policies to provide a series of case studies to customers, that help explain in what circumstances a policy may or may not pay out.

However, this is a voluntary code, which insurers are not obliged to abide by. And while it is a step in the right direction, it is no substitute for customers having the small print explained to them by the salesman.

Furthermore, most insurers are still hiding behind industry jargon. Cancer Backup argues that cancer should neither be classified as a chronic or an acute illness. However, the industry insists on putting it in the chronic camp. The first time customers hear about this is when they're having their claim rejected.

Although the ABI is working in the right spirit, it is only the regulator who has the power to force insurers to up their game. Call-centre staff - who sell most of these policies - need to be better trained. Sales procedures need to be made more rigorous. And jargon needs to be eliminated. In the meantime, the onus should be on insurers to prove that they made the terms of their policies crystal clear to customers before they signed up.

j.daley@independent.co.uk