Critical theory

Last month saw critical illness cover back in the spotlight with the Future of Critical Illness summit. Hosted by Bright Grey and Scottish Provident and featuring a panel of industry experts, it made a number of recommendations on how to reform critical illness insurance.

The condition race was at the top of the agenda. ABI assistant director of life and pensions Nick Kirwan said: “Everyone is in favour of more conditions but there may be some that no one has ever paid out on.” He added that consumers may need to be better informed about what they are buying.

Master Adviser partner Roy McLoughlin agrees there is a danger of providers confusing matters by adding too many conditions. He says: “The fact of the matter is there are only three or four core conditions that people claim on. Adding more could lead to consumer confusion.”

Highclere Financial Services partner Alan Lakey does not think consumer confusion is an issue. He says: “I think Nick Kirwan is looking at this from the wrong angle. The truth is that most clients accept they need to be covered but they are not willing to have a discussion about what a plan involves. They only want to do that when they make a claim. It is not about communication.”

One audience member suggested renaming CI as “survivor’s benefit” to reflect the individual nature of CI. Although most of the panel felt this was unnecessary, Lakey believes a name change could help the public make more sense of CI.

He says: “Survivor’s benefit does not ring true to me but I am not saying there should not be an alternative name.

“One problem with CI is the illnesses on which you can claim are not always critical. The Bupa plan pays out for a coronary angioplasty, which is a day visit. However, I do think that changing the name will undo the marketing build-up we have had for 20-plus years.”

McLoughlin is more dismissive of the idea. He says: “We should not tinker with something that finally has a good brand name.”

Raising awareness is something the protection industry is more united on. At the summit, Bright Grey proposition director Roger Edwards said: “Many of us have not got pockets as deep as Aviva but we do not all need to be doing TV advertising. We can be targeted about it.”

McLoughlin agrees. He says: “We need a big, green neon arrow that says, ’Go and get protection advice’.”

However, Mail on Sunday personal finance editor Jeff Prestridge contradicted this at the summit, saying marketing should be less strongly focused on advisers.

“That would be dangerous,” says Lakey. “Have consumers got an appropriate plan if they are not advised? The differences between CI providers are vast. HSBC only covers five conditions while Bupa covers 46. If people buy direct they are basing their decision on cost, not quality.”

The internet is one way of providing information free of advice and the question of whether the protection industry could piggyback on the Money Advice Service or whether the ABI would be best served by setting up its own initiatives was raised. McLoughlin does not think this is an issue and says: “Anything that increases communication channels is to be applauded. Why not have both?”

Lakey is more wary. “I would want a separate site. There are issues with the Money Advice Service. It does not give advice, for one. It is also not accountable to the industry, so it has its own remit. It also compares products on price, which is not the way to compare CI. It just would not work.”

Finally, the future of protection distribution was debated. Kirwan said: “The retail distribution review is an opportunity to increase protection sales as protection will continue to pay commission.”

McLoughlin says: “Advisers will be looking around for new products to advise on and new revenue streams. However, there is a caveat – we need a mass education process for advisers.”

Lakey points out that lack of clarity over Mifid II could jeopardise Kirwan and McLoughlin’s hopes for increased sales.

He says: “If you advise under Cobs, you may only work on a fee basis, which includes protection. If that is true it will turn advisers away from protection and advised sales will drop alarmingly. Perhaps that can be dealt with by setting up a separate company that is protection-only and works under Icobs. But then you have fees from two regulators and a whole lot of grief, which no one wants.”