The people I would most like to read this column, apart from IFAs, are those involved in product development, particularly those who say they are working on second-generation critical-illness products.
Because I want them to read this particular column, I have employed a trick that others may want to copy in the future, that is, to name every relevant insurance company within the text of this article. You see, I know that insurance companies employ agencies to scour the press for any mention of their name. These agencies photocopy these articles and place them in a neat pack for senior managers to read.
Why do I want them to read this particular column? Well, they are all debating the CI issues in public while trying to persuade us of their proposed solutions in private. I think they believe that their solutions are unique. They are not.
Their behaviour is driven by a desire to steal a march on the competition and I am certain they do not realise that they are all saying the same things in private. This could be a good thing if their product ideas are good ones but they are not in my opinion. Why? Because they have all forgotten that necessity is the mother of great inventions – necessity in the sense of customers, not reinsurers.
Just about every private conversation starts with them talking about reviewable definitions, quickly followed by: “Personally, I do not think that is the right route.” They then go on to describe a hybrid product that takes the worst characteristics of income protection and CI, which they plan to somehow smash together in the hope that it sells well.
I think it is the wrong product, weighted in favour of the insurer. The sample pricing is not good enough, it still has reviewable premiums and it does not come close to addressing the customer need.
My solution is to take the best characteristics of income protection and CI by providing a lump-sum payment on a successful claim, as most of these policies are sold alongside mortgages. If the client prefers income, there is always CI FIB. Claims should be measured against a pre-published set of tests to determine whether the impact of the illness or injury is sufficient to meet the product definition. Over time, illnesses that are unheard of today will fall into the definition and, as medical advances continue, existing illnesses that become easily treatable and less serious will fall outside the definition.
So, you need to get together and agree on a template definition, avoiding confusion with first-generation products by calling it something different like catastrophic illness insurance. If you work together to agree a template, IFAs will be able to compare easily and make recommendations, the pricing should be in line with current low-start (sorry, reviewable) premiums and the benefits will be clearly defined at outset.
You may not like my solution – it isn't perfect – but now is the time for you to talk to each other openly in front of us. Be brave, be prepared to make the odd mistake and remember that if the people who developed the first-generation products had been as cautious and secretive as you, we would not have had the benefit of the cover for the last 13 or so years.
I am not sure if the following is Latin but it conveys my entire message in two simple words: “Fingers extractus.”
Now for that list of insurers – Bright Grey, Bupa, Friends Provident, Legal & General, Standard Life, Skandia, Scottish Widows, Scottish Equitable, Scottish Provident, Liverpool Victoria, Norwich Union, Prudential and Zurich.
Richard Verdin is sales and marketing director of Lifequote