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Roger Edwards: Critical illness cover is on life support


To much fanfare, product providers publish their annual new figures in the first quarter of each year. Have they built upon their previous successes? Have they increased their market share? Such declarations give us an insight as to the shape of the provider in question but also about financial services markets in general.

In protection, another eagerly awaited source of market intelligence is Swiss Re’s Health and Term Watch report, usually published in May. Its 2015 report, covering sales during the previous year, made for depressing reading. Each of the three most important protection sectors – life, critical illness and income protection – showed double-digit reductions. We waited expectantly for Swiss Re’s latest publication. Would the decline be reversed?

Well, despite a sharp increase in direct-to-consumer term life insurance sales, overall sales of life cover fell a little again. Income protection enjoyed a modest increase, perhaps due to the success of the Seven Families campaign. But the critical illness slump continued to an over 30 per cent reduction spanning the last two Health and Term Watch reports.

Positive stories about critical illness cover abound in the trade press. You can read about record claims payments often in the high 90 per cent from most companies. The industry has worked hard to overcome the consumer perception that we turn down the majority of claims. We should celebrate this success.

You can scan reviews of frequent additions to the number of illnesses and disabilities covered. The breadth of cover on offer is approaching fully comprehensive. We are giving consumers more cover than ever. That has got to be good, right?

But still the market plunges year on year. Are we not taking the hint? Despite the positive success stories about claims and conditions covered, fewer advisers are talking about critical illness cover. Fewer consumers are buying it.

Has competing on complexity, the so-called “illness race”, gone too far? Are approaching 100 conditions, partial payments and ABI plus definitions too much for advisers to explain, or too difficult for customers to take in?

Is the long and intrusive underwriting process now just too much hassle for the reward, commission or fee, of recommending the cover? And putting these concerns to one side, do consumers still distrust protection providers and think they will weasel out of paying claims? The national media certainly fuel that fire with their printing of sensational stories.

Most product providers will not try anything different because it takes time for something different to catch on. Better to hang on in there and compete for a share of a declining market rather than admit the product needs to change. Or that the market at least needs an alternative.

Who will admit that it is impossible to win the illness race and drop out while still invigorated enough to start running in another? Is a simpler product, perhaps covering outcomes rather than conditions, as suggested by CI Expert’s Alan Lakey, the answer?

One thing is for sure: we can celebrate the success of the existing model’s claims record and be proud of it. But unless someone tries something different, do not expect to see positive growth figures in next year’s edition of Health and Term Watch.

Roger Edwards is managing director of Roger Edwards Marketing and marketing director at  Protection Review



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  1. What a balanced well written piece Roger, well done. It would be interesting to map whether the decline in CI sales mirrors the decline in bancassurance sales as mortgage protection was a natural entree for the product. As you say no insurer is going to cannibalise its own market share to launch a new unproven product. What you need is a tied sales force that can sell a differently shaped policy to customer needs because they dont have access to the conventional product. This would allow the product to gain traction. Unfortunately that distribution channel is extinct…

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