Insurers should introduce a simplified critical illness product to help close the protection gap, says Defaqto head of life and protection Nick Telfer.
He has put forward suggestions for a plan that covers only cancer, heart attack, stroke and multiple sclerosis because these account for the vast majority of claims paid.
He says such a plan would be easier for consumers and advisers to understand than existing products because awareness of these conditions is high.
Telfer says: “Statistics show the vast majority of claims are paid out on these four conditions and they are also the conditions people are most worried about. Some products have illnesses which I doubt have ever been claimed for and have clearly been added as a marketing gimmick.”
He believes limiting the conditions covered would also speed up the application process because underwriting would be easier. This could also reduce premiums slightly.
A recent study by Swiss Re found that protection sales through mortgage brokers fell by 10 per cent in 2006.
Telfer says: “This would be simpler to sell, simpler to market and marginally cheaper. Mortgage advisers perhaps do not go to the same level of detail as protection specialist IFAs so a simpler product fits with that.”
Royal Liver technical manager protection Mark Davies says: “A product which covered the core conditions would not save much time on underwriting because the core conditions cover most claims anyway and the vast majority of claims are within those conditions. I would not expect to see any significant savings to a customer’s premiums.”