Updates are a regular feature of critical-illness insurance because as soon as one provider decides it’s time to review their products and underwriting process, others follow. After all, nobody wants to be ‘so last season’ while competitors jump several steps ahead.
But do these changes ultimately make much difference in terms of making policies easier for advisers to sell? Or is it the case that providers are just trying to ‘keep up with the Joneses’?
New kids on the block Guardian Financial Services believes that the key to growing the critical-illness insurance market is ensuring advisers have the confidence to sell the products. “There’s a fear that they’re complicated products that are difficult to give advice on – there are pages of medical definitions. For advisers to give advice on it they need to be confident that they understand what they’re selling and that they are meeting their internal compliance,” says Guardian’s proposition director Katya MacLean.
Guardian is trying to do things differently – not for the sake of it but to do things that seem obvious from a consumer perspective. For example, it has reduced the usual heart attack definition from around eight lines of text to one and a half. Instead of requiring detailed medical reports and using enzyme levels to establish if a heart attack has occurred, Guardian will pay out upon confirmation by the client’s consultant.
“We don’t think we’re the best person to decide whether someone has had a heart attack – their doctor is and that’s why we’ve written the definition that way,” says MacLean. “We’ve designed this to increase confidence. It might seem quite bold to the rest of the industry but from the consumer’s perspective it’s just obvious.”
Commentators points out that providers used to try to outdo each other on the number of conditions they covered and although some may feel conditions are still added for the sake of it, times have changed.
“Between 2009 and 2014 providers were adding conditions willy-nilly. In the main this has stopped, partly because of CI Expert, where each condition is valued for age range, gender, sum assured and smoking status,” says CIExpert director Alan Lakey.
“In a sense, companies have run out of things to cover now, so some have given up and compete on other things, like optional extras and increasing payouts.
“But we mustn’t forget that some companies don’ t want to compete on that basis because it’s easier for them to compete on price.”
With help from CI Expert, AIG has just made 40 changes to its critical-illness cover, ranging from ‘very small tweaks to big differences.’ It has added 25 conditions and increased the maximum partial payouts from £25,000 to £35,000. AIG says its changes are geared towards what it can do to pay as many claims as possible. This might include improving definitions, simplifying things and making cover more generous.
AIG Life senior propositions manager Nicki Plews says: “We added severe sepsis because we had read about it in the press and spoke to doctors about it. We also looked at adding pneumonia, but found we would already cover it under things like intensive care cover.”
The firm’s recent doubling of its child death cover from £5,000 to £10,000 was not an exercise in one-upmanship over competitors, but rather a recognition of rising funeral costs.
Without medical training, many advisers struggle with policy wording and this doesn’t inspire confidence to sell.
The extent of the problem is highlighted by Finance & Technology Research Centre director Ian McKenna. When he approached a Harley Street doctor to join the panel of medical experts that assess CI plans for F&TRC’S Quality Analyser tool, the doctor was so baffled by policy wordings that it took him four hours to get his head around it all.
“When a Harley Street doctor says they found the wording hard to read it brings some significant questions of the industry,” says McKenna.
Lifesearch life office relationship director Emma Thomson agrees. “Unless advisers use something like CIExpert or F&TRC’s Quality Analyser – or unless they have a medical degree – it is becoming harder to understand. Each time insurers add new features and definitions it adds new layers to the overall complexity for advisers,” she says.
Lakey believes the effectiveness of providers’ tweaks and new features in helping advisers sell CI cover depends on the adviser.
“Some advisers know what they are doing and have a different level of knowledge and analysis.
“But some look at premiums and go with cheapest, not on the basis of analysis, but because they think its possibly easier to sell it if it’s cheaper.
“Others give up trying to compare policies,” he says.
“Unless you use something like CI Expert you’re not going to differentiate and will probably just recommend the big companies that the client has heard of.
“You can get away with that to a point, but not when they meet someone who knows a bit about it and they say to the client why have you got that, did you know you could get this?
“That’s when they might think about changing their policy – and their adviser.”