Datamonitor has warned IFAs of a slump in criticalillness sales, saying it expects only a 20 per cent growth from the current £330m to £389m by 2008.
The analyst does not believe there will be a market crash but advises IFAs to seek other sources of revenue if their business streams are heavily reliant on CI.
In a report published this week, entitled, UK Critical Illness 2004 Report, Datamonitor predicts that with an expected stockmarket recovery by 2005, there will be renewed confidence in the savings market, leaving consumers less likely to take out protection products.
The report says new CI business grew by just 10 per cent in 2003 compared with 30 per cent in 2002. It shows scepticism towards new-generation products, finding little evidence of moves towards them. It also warns against altering the simplicity of CII sales processes.
The industry has come under increasing pressure as claims have soared, medical science has advanced and survival rates have increased. These events and the withdrawal of some reinsurers from the market are cited by the report as contributing factors towards the average 30 per cent premium increases in 2003.
The report's author Janette Weir says: “At present, the sales process is very easy. If the disease happens, a lump sum is paid. Measures such as altering the definition of the conditions while the policy is in force are fraught with difficulties in interpretation and could lead to the next misselling scandal.”