Dr. Marius Barnard, the heart surgeon who was part of the team that performed the first human-to-human heart transplant in South Africa in 1967, was also the person credited for inventing critical illness insurance. No, an insurance company did not come up with the concept of critical illness insurance. Rather, it was a doctor who saw the financial difficulty of his patients who survived heart surgery. As a heart surgeon, he helped many patients make a full recovery from their illnesses, but at the same time saw them suffer financially in the years to follow.
“I was used to operating on people and boasting about my great results of patients surviving five or six years. But all of sudden I saw the social and financial implications. I knew nothing about insurance but I knew life insurance paid out on the diagnosis of death. But to me, my patients lived for years but in this time they died financially.”
-Dr. Marius Barnard
Dr. Barnard passed away on November 14, 2014. The legacy he leaves behind, critical illness insurance, have helped many people avoid the financial disaster that he frequently witnessed during his practice. In memory of Dr. Barnard, let’s take a look back at the history of critical illness insurance.
In the early 1900s, people had a life expectancy of around 50 years, and the survival rate from diseases such as influenza and pneumonia was very low. Therefore, life insurance was the only type of insurance that people needed, since a death benefit was nearly a certainty to be paid whenever one suffered an illness.
Throughout the 20th century, medical discoveries such as antibiotics and vaccines led to an increase in life expectancy. What was once a fatal illness was now curable. Heart disease, cancer, and stroke became the leading causes of death, although these were now also treatable. As medicine advanced, more people were able to survive these illnesses, although not always in good health.
Dr. Barnard recognized that his patients, although able to survive a heart disease, were unable to return to work in full capacity. The lingering effects of their illnesses, surgeries, medication and recovery had an enormous impact on their ability to earn an income. Although they had survived, they were overcome with financial hardship. These were people who were breadwinners of the family who had dependents they were no longer able to support.
While the families of the patients would be supported financially had they died, they didn’t have financial support should they live. There appeared to be an increasing need for a type of insurance that would pay a benefit to the owner if he suffered from a heart attack, in addition to the need for life insurance. To broaden the usage of this new type of insurance, coined critical illness insurance, he included coverage for the four most common critical illnesses – cancer, heart attack, stroke and coronary bypass surgery.
In 1983, along with the help of a South African insurance company called Crusader Life, Dr. Marius Barnard introduced critical illness insurance to the market. As a medical consultant to Crusader Life, Dr. Barnard helped detail the definitions of the critical illnesses, which still stand today. As long as the owner developed one of the four covered critical illnesses and met the definition, a lump sum benefit would be paid to him/her. The payment could be used however the owner saw fit, with the most common options being:
- Pay down the mortgage
- Pay for costs not covered by health insurance
- Used as income replacement
- Make modifications to the home to accommodate decreased mobility
- Income replacement for the spouse to take time off work to care for the owner
Basically, it removed any financial strain that the owner suffered, while keeping the focus on the road to recovery. People now had the option of passing the financial risk associated with a critical illness to an insurance company. And many did just that, as witnessed by the rising popularity of the product. Other insurance companies launched their own critical illness insurance product, and soon more illnesses were added to the list of covered illnesses.
In 1991, Dr. Barnard brought critical illness insurance to the UK and adapted it to children, which gave them coverage under their parents’ policy. Today, 1 out of 5 claims in the UK are from children, with the majority suffering from leukemia.
Critical illness insurance crossed the Atlantic in 1997, landing in the US through the US division of Canada Life. With many years of experience spreading the word of critical illness insurance under his belt, Dr. Barnard was able to penetrate the largest economy in the world, exposing the concept and product to millions of people.
Today, critical illness insurance has evolved to cover more than 20 illnesses. It comes in many forms in Canada, including term-10, term-to-75, term-to-100 and paid-up policies. Even combination products such as Manulife’s Synergy and Industrial Alliance’s Child Life and Health Duo have been developed. There is a product for everybody, no matter the budget or the need. The sale of critical illness insurance continues to grow, as more people recognize the importance of protecting their finances should they survive a critical illness.
As the architect behind critical illness insurance, Dr. Barnard has provided a way for people to transfer the financial risk of a critical illness from themselves to an insurance company. His invention has forever changed the lives of millions of people.
Image courtesy of Vichaya Kiatying-Angsulee / FreeDigitalPhotos.net