Trauma insurance is designed to pay the insured a lump sum (the benefit amount) if a “major medical trauma” occurs.
In line with the intent of the contract, a major medical trauma is one that is likely to lead to the insured incurring additional expenditure so that they might:
n obtain the best medical care, either here or overseas;
n gain access to rehabilitation services that will enable maximum recovery and re-entry into the workplace or life generally; and
n facilitate a desired and warranted change of lifestyle.
As with all insurances, the aim is to compensate for a loss rather than provide a financial windfall for the insured. If the latter occurs, the contract should be seen as poorly designed and/or worded.
A contract should also be judged harshly if the terms and conditions are not drafted in such a way that the insured is clear as to what is covered and what is not covered.
The most challenging aspect of any trauma insurance policy is the wording of the definitions of the insured events.
The definitions should be worded such that only trauma events of an appropriate level of severity generate a claim payment and also so that the extent of cover is clear.
Current medical position
In order to ascertain the current medical position, meetings were held with Sydney Melanoma Unit Director Professor John Thompson;Tower Lifechief medical officer Dr Anthony Christie and Lifescreen’s Vanessa Hindmarch.
Professor Thompson noted that Clark Level as a prognostic tool for cancer had not been used by the medical fraternity for some 15 years.
All practitioners indicated that the best prognostic tool was depth of invasion. Hindmarch also noted that Clark Level was shown less and less on histology reports.
Another complication with Clark Level is that the thickness of the skin not only varies in different parts of the body, but as you grow older the skin becomes thinner. Thus a particular Clark Level may be of greater or lesser severity depending on the site of the melanoma and the age of the insured, further adding to the inaccuracy of it as a prognostic tool.
Current cancer definitions
Most cancer definitions have an overriding requirement that the tumour be “characterised by the uncontrolled growth and spread of malignant cells, and the invasion of tissue…”
The generally accepted practice is then to state that melanomas will be covered if they are “at least Clark Level 3 or a depth of invasion of at least 1.5mm”.
Companies currently taking this approach are AIA, AMP, Asteron, AC & L,AXA, CitiInsurance, CommInsure,ING,PrefSure, Suncorp,Zurichand Westpac.
The depth of invasion range for a Clark Level 3 is 0.75 to 1.5mm, therefore the reference to a depth of invasion of 1.5mm would appear to be redundant.
One course of action could be to delete the reference to 1.5mm but if this was done, the definition would lose the most accurate prognostic tool and be left with a tool that has been little used for the last 15 years.
If the intention is to cover melanomas of 0.75mm or greater that demonstrate “uncontrolled growth, etc”, this could be done by deleting the reference to Clark Level 3 and reducing the depth of invasion reference to 0.75mm.
If this is not the intention, why have a reference to Clark Level 3?
The Aviva definition has an over-riding criteria of “major interventionist therapy including radiotherapy, chemotherapy, biological response modifiers or any other major treatment”. This might well exclude Clark Level 3 cancers.
Lumley has the over-riding criteria of “malignancy” but excludes cancers less than Clark Level 3 unless they are of greater than 1.5mm in thickness. My understanding is that it is not possible to have a melanoma of less than Clark Level 3 that is greater than 1.5mm.
MLC also has the over-riding criteria of “malignancy” but excludes cancers that are either less than Clark Level 3 or less than 1.5mm in thickness. It seems that all Clark Level 3 melanomas are less than 1.5mm and thus the exclusion would apply to Clark Level 3.
Conclusion
The above all seems to add up to a compelling case to remove the reference to Clark Level in the definition of cancer — something that one company, Tower Life, has already done.
The retention of a depth of invasion reference, with the over-riding criteria of “uncontrolled growth, etc” would then enable:
n a prognostic measure in line with current practice; and
n a clearer basis for contract comparison.
In a broader sense, advisers should be encouraging companies to minimise potential claims disputes by ensuring policy wording as clearly as possible sets out what coverage is in place.
Col Fullagar is marketing manager, risk products forAssociated Planners Financial Services .
NOTE: Definitions have been taken from Pro-Planner Research. Whilst any inaccuracies are regretted the article has been produced for the purposes of discussion not for the purposes of product comparison.
