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Childeren's cover - what does your client need to know?

Most parents don’t like to think about their child falling ill, but it is, unfortunately, a fact of life. Emily Perryman assesses what types of cover are available to give parents’ more peace of mind

November 2009 Features

The thought of a child becoming sick is every parent’s worst nightmare. Fortunately, there are a whole host of products available that ensure prompt treatment and financial protection are available when the unthinkable happens.

A fairly recent development has been the introduction of standalone private medical insurance (PMI) policies for children. September saw the launch of Child Health Solutions, which provides specialist paediatric health cover for £13.50 a month. The product is provided by Child Health Cover, the trading name of Sure Insurance Services, in association with Aviva and offers a range of benefits such as speech therapy sessions, dental care, physiotherapy, osteopathy and acupuncture. The policy also includes 24 hour GP and stress counselling helplines, accommodation for one parent when staying with a child in hospital and free online child health information.

Rebecca Freebody, head of propositions management and market development at Aviva UK Health, says customer focus groups carried out by the insurer revealed that even if parents could not afford to cover themselves they still wanted to cover their children.

“When we first conceived the product there wasn’t a child-only product available in the market. Our product has core cover similar to adult PMI, but it also covers physiotherapy, chiropody, dental and speech therapy which often have long NHS waits. Our policy is comprehensive in that as soon as the child needs treatment they can access it straightaway,” says Freebody.

AXA PPP healthcare also offers a child-specific PMI policy, called First Healthcare, which pays for private inpatient and day patient hospital treatment if the NHS cannot see the child within six weeks. This aims to strike a balance between avoiding delays and keeping premiums affordable. The plan costs £9.99 per month for the first child and £8.99 for each additional child.

Ben Faulkner, a spokesperson for AXA PPP, says: “Regardless of waiting times, the policy covers immediate access to private outpatient tests and costly MRI and CT scans. It also pays – again irrespective of NHS waits – for the child to see an experienced consultant privately at a convenient time for both child and parent, helping to relieve the worry of not knowing what’s wrong.”

Some of the most common claims made to AXA PPP are for ear, nose and throat-related conditions as well as squints and hernias. In teenagers, it has seen an emergence of claims for the treatment of musculoskeletal conditions, such as scoliosis and cruciate ligament reconstruction.

EXTENDING ADULT COVER

The most common way of providing medical cover for children in the individual market is to allow parents to extend their own PMI policies to cover their children. Fiona Harris, head of strategy and development for Bupa UK Health and Wellness, says most people with PMI will add their children onto the policy. Although most adults are happy to use the NHS for their children, they want fall back private cover if there are long waits or certain treatment is not available.

“Generally children are well-treated by the NHS. Private cover for children is therefore substantially cheaper than adult cover because it is not used as much,” says Harris.

According to Stuart Scullion, sales and marketing director at The Private Health Partnership, there are two methods of establishing the cost of adding children. Some insurers will add the new child dependant from birth but will not charge a premium until the next subsequent renewal of the policy. Others charge 50% of the adult rate and if there is a significant disparity in the adult ages it is worth splitting the adult policy and adding the dependant children to the younger adult life.

Scullion says one of the key benefits to look for is parental accommodation: “A parent accompanying child benefit is crucial to sit alongside the inpatient and day case benefit as this will allow a parent to stay in hospital with an overnight accommodation where the child is in the middle of a period of hospitalisation.”

Another key way of covering children’s medical treatment is via a parent’s employer. Some corporate PMI schemes just cover the employee, some cover the employee and their partner and others cover the employee and their whole family. If dependants are not automatically covered, some employers allow staff to add on their spouse and children at a discounted rate which is then taken out of the payroll. Howard Hughes, head of intermediary marketing at Simplyhealth, says the decision to cover dependants is usually based on why the company is offering group PMI in the first place.

“If the company’s main concern is to get staff back to work quickly they probably won’t extend cover to dependants. However, if they want to provide PMI as a perk then extending cover to the whole family is a nice touch,” says Hughes.

Although there is a risk that dependants cover could hit the company’s claims experience, Hughes says this would most likely occur from covering spouses rather than children.

“I don’t think children are likely to be making the big claims. Usually children’s claims are for simple things like inserting grommets to treat glue ear,” he says.

Another less well-known way of providing PMI for children is via private school schemes. These are sold through the schools themselves and are offered either as part of the fees package with an opt-out clause or on a voluntary basis. Hughes says the schemes reassure parents that their child’s health is being looked after while they are boarding.

OTHER PRODUCTS

For parents on a very tight budget, cash plans are an even more affordable way of covering children’s everyday healthcare needs. However, there is a lot of variety among providers with regards to how much cover is provided for children. Sue Smith of Oxfordshire-based intermediary Health Care Plus says some insurers have a fixed amount for, say, dentistry which is split between the children.

“The adults can get £200 each but the children may get £100 and this is split between them. It is worth looking into each company’s policies,” says Smith.

By contrast, Health Shield will add children onto their parent’s cash plan for free and will give each child the maximum benefit level. According to Lara Rendell, marketing manager for Health Shield, a family of four could effectively get £820 back on dental cover level four. The most popular benefits are optical and dental, but Rendell says some adults also use the health and wellness benefit for their children, for example if their baby cries a lot.

Children’s cover is also automatically included in most critical illness (CI) policies as a free extra. The cover pays out a lump sum to enable the policyholder to pay for treatment or take time off work if their child suffers a critical illness. Legal & General will pay 50% of the sum assured or £15,000, whichever is lower, and this will not reduce the sum assured for the adult. Only one claim can be paid for each relevant child up to a maximum of two claims in total for all relevant children. Of the CI claims that L&G paid last year, 2.6% were for children's cover. Cancer tends to be the main cause, accounting for 77% of the children’s CI claims that L&G paid in 2008.

So while the NHS is widely considered to provide a good service for children, for those parents who want added peace of mind there is a wide range of products to suit all budgets and needs.

PRIVATE PAEDIATRIC HEALTHCARE

Some hospital groups are trying to make the experience of getting medical treatment as child-friendly as possible. At the Harley Street Paediatric Group, for example, the waiting room is filled with boxes full of toys, Playstation and Wii games, DVDs, a light display and a musical wall. Each bed has its own TV screen and some corridors feature mood lighting and a digital fish tank. The group, part of HCA International, offers all aspects of medical care, from a simple tonsil operation to complex surgery, and provides diagnosis, treatment, rehabilitation and continuing care. Approximately 60% of the patients have PMI while the remaining 40% are self-pay.