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The CI challenge

A rep from a major insurance provider last week mentioned the company was looking to revamp its critical illness cover plan to bring it more in line with the competition, which made sense looking at its sales statistics on CIC.However, one thing made me stop and think. When discussing the number of conditions covered, the rep said: “Yes, but we do not want to play that game. What is the point of having 40 conditions on your plan when you are only likely to claim on less than a third of them?”

I had to take a breath and then realised this is right. Insurers, in a bid to grab more headlines and business from the front-end salespeople add extra bells and whistles that do not necessarily create protection value.

Claim statistics from four key insurers show there is one clear commonality – cancer was the biggest cause of claims on CI in the UK in 2009. The highest volume of claims, the highest level of payouts and the highest overall individual sums paid all derive from cancer-related diagnosis of a critical illness. These are followed by those regular causes of ill health – heart attack and stroke.

Since dread-disease cover was created in 1983, the staple list of conditions covered has not shifted that much. Over the last 27 years, medical technology has improved significantly and the speed, efficiency and cure rates of many of the illnesses covered have improved. In fact, it could be questioned as to whether some of these illnesses should be considered a dread disease at all now.

This tells us that what the industry should be focusing on is improving its own critical-illness offering through innovation rather than simply adding conditions in a race between insurers to see who can offer the most.

Some insurers have made great improvements, such as Axa’s introduction of mastectomy cover as a new and crucial addition to its CI offering, but more needs to be done by the sector as a whole.

PruProtect severity-based coverage is a good example of successful innovation. It is a bold product development that is having an impact on clients’ lives, due to the unique way in which it pays out. It has been well received by our clients, as has Axa’s mastectomy cover. Other insurers are also working hard.

So we know that some in the industry have risen to the challenge of providing innovation in major areas of illness instead of looking to tinker round the edges.

Obscure conditions can have their value, but not when it is at the expense of genuine transformation.

So, a challenge to insurers is to be bold with your CI product and make it relevant to a 21st century audience – not a 20th century one.
Duncan McMillan is head of sales at LifeSearch

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Can there be such a thing as too much choice?

    I believe that online and direct offerings must be kept simple which may explain why the five condition HSBC plan sells well.

    Equally, my clients expect a consideration of their individual circumstances and a value judgement regarding the way forward.

  2. Good piece Mr M. I dont really know why as an industry we mess around with the little things while not covering early stage cancer – which as you rightly point out is why people buy CI in the first place. Everyone should be covering early stage cancers. What is more, we’ve been doing a lot of research at Protection Review on what intermediaries want from CI going forward, and it seems the majoirty want something stripped down – with the ability to add on the extras where appropriate.

  3. Having worked for a provider of protection selling to IFA’s, the problem that you have is if you are not the cheapest, you need to have an angle. Be this the most definitions (at the time I was doing it Bupa) or silent heart attacks (scot prov). It was fine to have good arguments regarding how most of the additional definitions would be covered by existing definitions and therefore added no value, but from most IFA’s point of view it was easier to sell to clients the policy with most definitions as this is what the client would understand.

    The key to the CI market though is price as this is what the vast majority of IFA’s sell dispite what they might say.

  4. The biggest issue with CI, is over complication. Every provider has ‘fillers’ in their plan, i mean CJD? honestly…..
    A provider needs to take a chance and put something different out there. i applaud Pruprotect, its a phenomenal plan, but costwise it’s just too expensive. Fortis and their ‘Real Life’ plan, despite being a bit rubbish, was at least an effort at innovation…….do any of the providers have the bottle to try soemthing different, stripped down, straightforward, cost effective, and open to the majority.

    Whoever does will clean up.

  5. A polarisation of views.

    Tariq, I have to take issue with the PruProtect comment because their pricing is in the mainstream and shouldn’t be an issue. In any event, if you sell on price and not value you leave yourself open to losing the client when an even cheaper plan arrives.

    Andy, I am sure you are right that most advisers sell on price and really, this is something that as advisers we need to combat.

    If the banks decide that they want to vacuum up large chunks of the market they can play the price game much better than us. look at HSBC and years back Lloyds TSB leed the table in IP sales.

  6. Alan Lakey

    the vast majority of cic plans sold here are Axa & Bupa (rarely the cheapest), based purely on quality of contract.
    Whilst i believe in the Pru plan, without adding the ‘minimum protected account’ the plan doesnt stand up, especially for Mortgage protection. Add the protection and the cost expands again.
    Quote Pru through portals and you are not getting the correct price as you are not offering the client the full benefit, and unfortunately adding the full package will drive the cost out of the ‘mainstream’.
    Whilst this shouldnt stop anyone offering the Pru, part of giving advice and recommendation (especially from a compliance point of view) is affordability.

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