We were debating (read that as arguing) in the office whether critical-illness cover could be sold within a simplified product regime and trying to hypothesise how the current range of CI products could be sold under a simplified advice process. You can imagine the difficulties as we still have no idea whether these “simplified” concepts will turn into reality and, if they do, how they would operate within the existing framework.
We took a step back and looked at the current position to assess how we operate in the market to support the sales of CI products.
We have intermediaries using LifeQuote software to get a range of CI quotes ranked by price, where the selection of provider is the responsibility of the adviser within their normal advice regime.
Within the direct market, the customer is buying because the products are accessible via specific brands or aggregation sites, where we are discounting and often providing much smaller sums assured via an upsell mechanism.
The sum assured, term and provider is the customer’s choice, with the decision supported by the normal literature you would expect to see. Over the years that DLPS has been operating, tens of thousands of CI policies have been sold via these channels. But CI product sales have never reached their potential and sales have been slightly decreasing, with standalone CI virtually disappearing.
There are two main reasons why we are not selling as much critical illness – it is too complicated to explain easily to most consumers and it is too expensive.
Products are complex to explain as more providers add additional covers and provide additional payments without reducing the sum assured. The products provide great cover but the degree of complexity holds back sales as people do not buy what they do not understand.
The perception is that CI is an expensive product. I would argue that term cover is too cheap, so when a consumer looks at buying CI, all they see is the pricing differential and the link to increased likelihood of claim is rarely made.
The name critical illness is very subjective and will be measured by the client at the time of an incident. In reality, the contract pays out when a listed condition is met. Could we look at it in a different way? Could we provide very specific cover for defined illnesses such as heart attack, cancer, stroke and multiple sclerosis and within a product solution define the premium for different sums assured?
Another way of looking at this is to try and redefine what a life-threatening critical illness is and what a serious illness is. Restructuring the sale of CI from a lump-sum payment to an income-related benefit over a restricted period could be more appropriate, appealing and cost-effective.
Neil McCarthy is sales and marketing director at Direct Life and Pensions