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Critical issues to address on sales growth

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

Healthwatch 2001).

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

2000/01?

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&#39t 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

separately.

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.

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