Head of Mortgages and Insurance Stephanie Charman investigates whether the increasing number of covered conditions has made the critical illness industry too complicated for consumers and advisers alike.
When Critical Illness (CI) cover first arrived in the UK in the 1980s, it was a concise concept that originally covered just four conditions. We have now come a long way in ensuring that as many conditions as possible are covered, which is for the most part a positive thing for consumers. But has it now had a detrimental effect on the industry, over-complicating it for consumers and advisers alike?
Despite published claim statistics and the improvements to cover, CI sales in general have remained stagnant. As a result, the protection gap in the UK has also remained unchanged. This begs the question: has the continuing addition of conditions conversely dampened the attitude towards CI?
For a number of years, providers have been engaged in competition known as “condition counting”. This has been exacerbated by the general adviser preference to go with the policy that covers the most conditions, providing a perceived “value” to the protection. But this has led to a complex and confusing market for both advisers and consumers, as they struggle to understand and absorb information regarding the most obscure conditions.
However, experts suggest that we are reaching peak saturation of condition counting, and surely all a client is looking for is surety that providers will pay out when they need it most.
Currently the five main conditions (cancer, heart attack, stroke, MS and Children’s Critical Illness) account for 88% of all Bright Grey’s claims, which highlights the importance of these central conditions. Munich Re’s Julie Scott suggests: “One simple answer could be for insurers to consider realigning the features of the product with its actual name and focus once more on the truly critical conditions that have a fundamental impact on consumers’ lives.” This would certainly help advisers to use relevant statistics to support their client conversations, such as the recent research regarding cancer survival rates in the UK.
Since MMR the onus on the intermediary has become even heavier and providers must ensure that the brokers benefit from protection change as much as the consumer. This means ensuring advisers have the means to effectively match consumer circumstance to policy options, so that consumer outcomes are effectively and consistently met. This will in turn result in more positive protection stories with substance, instead of simply publishing statistics that are read by few outside of the industry.
Providers need to simplify and expand at the same time. This may seem contradictory, but if expanding means offering more than just financial protection, then the simplifying can happen within policies. I wrote last month about Friends Life’s Global Treatment, which is the sort of outside-the-box thinking that is becoming vital as we move into an era where advanced treatment means more people are surviving disease and illness.
Some experts believe in a more radical approach to changing CI. But as long as the condition counting ends, definitions become more concise for consumers and providers continue to vary how cover is delivered, we will hopefully witness a shift in attitudes. Advisers are financial experts, not medical, which is why there is currently some timidity to enter a CI market saturated with complicated and esoteric criteria. To help you, we have a protection helpdesk of experts ready to assist in locating those tricky cases and deal with obscure conditions.
If you are interested in becoming an appointed representative of our award-winning Mortgage Network or a member of our Mortgage Club, contact the Broker Support Team today on 0845 130 7446 opt 1.