Increased consumer awareness, the recognition of need and industry focus
have all contributed to a rise in sales of critical-illness cover,
particularly in the mid to late 1990s. Add to this the ABI statement of
best practice which brings clarity to consumers when comparing products and
it is good news all round.
However, just as the successful sporting team needs to build for the
future, it is at times like these that we must ensure the success continues.
It can be argued that it is not possible for a market to carry on
increasing at the rate experienced during the 1990s. Overall sales of
critical-illness policies did not show any increase in 2000 over the
previous year for the first time in a nine-year period (source: Swiss Re
So, while critical-illness business in 2000 accounted for over 30 per cent
of all new individual regular-premium life policy sales – up from 24.5 per
cent – we should not be complacent. This increasing percentage is
exaggerated by falls in other product areas.
Are these figures indicative of a trend and, as such, a warning shot that
should not be ignored? Is there a danger that we will find ourselves
looking back in two or three years and saying we missed the signs in
We must guard against focusing solely on current debates around possible
advances in medical science, important though these are. Instead, we must
focus on the customer.
First, let us consider critical-illness cover to protect the mortgage.
Although it is true to say non-mortgage-related sales have increased, that
still leaves around two-thirds of cover that is mortgage-related. Does this
mean the fundamental reasons why criticalillness cover was developed have
been sidelined to meet only loan protection needs?
Perhaps, for understandable reasons, advisers feel that to move into the
non-mortgage-related protection area at the time when mortgage protection
is being put in place would result in protracted client meetings and
possible client resistance. Recent developments in menu-based sales systems
have now addressed this. Advisers can now move seamlessly from loan
protection to individual and family protection in a structured and simple
manner. In this way, the opportunity is created to present the full range
of protection choices to clients, including critical-illness cover over and
above the mortgage amount.
Second, we should consider affordability and value for money. This will
always be at the heart of any recommendation of protection cover.
With critical-illness cover, there can be differences in the lists of
illnesses on offer from providers. But to offer best advice, there are a
number of factors to consider and advisers should not rely wholly on the
number of conditions covered by a policy. Advisers need to look at a
combination of factors including illnesses covered, price and likelihood of
claiming. The difference in price, for example, could be 30 per cent for
the sake of a few extra conditions.
Statistics from Swiss Re show that 97 per cent of critical-illness claims
relate to the seven core conditions plus permanent total disability. So,
recommending a policy with a higher sum assured and value for money rather
than a longer list of conditions could be considered best advice.
Finally, IFAs should consider survival periods. Why have them? Well, it is
all about survival, isn't it? So, 14, 21 or 28 days are all reasonable
timescales. Regrettably, however, a client may not survive a heart attack.
Clients should understand that life insurance needs should be addressed
Envisage the widow asking: “I thought this policy covered critical
illness? Well, my husband has died from a massive heart attack and he was
paying £30 a month for the last 15 years.” A combined life policy with
accelerated critical-illness cover can be a value-for-money alternative to
a stand-alone policy. There can be minimal differences in cost and the
issue of survival periods becomes irrelevant.
Opportunities are vast and, with continued focus on customer needs,
critical-illness sales will continue to prosper.