Ned Flanders’ house is destroyed by a hurricane in The Simpsons. Ned had no home insurance because he believed insurance is a form of gambling. Insurance is a bit of a gamble, weighing up the odds of the worst happening and working out which critical-illness cover to recommend has become more of a gamble in recent years.
CIC is a great product but every new enhancement makes it harder to establish which is the best cover and information from providers is scant about how additions will lead to more paid claims.
It is difficult to know if the policy that looks to be the most comprehensive will cover what a customer might get diagnosed with, due to so many variants. Providers are making things complex by adding on competing conditions that might not make much difference to ability to claim but which still have to be considered by the adviser.
We also have some providers questioning whether some recent ABI+ additions from their peers are true ABI+. Are we going to end up with ABI+ and ABI++ and even more complexity? I hope not.
Then there is total permanent disability. I am concerned that varying definitions of incapacity look to remain as they lead to claims being declined. If TPD is offered, it should be priced on an own-occupation basis or not at all.
It is a tricky problem to solve, given the competitive nature of the market, but the more I worry about CIC, the more I am reminded of the benefits of income protection. Ideally, customers should have both but if they cannot, IP can be a safer bet and is often better advice anyway.
There are circumstances when CIC will pay and IP may not due to a long deferment period but at least customers plan for that at outset and are not risking being diagnosed with something not on the CI list. Severity-based plans are an alternative but I still believe IP is the strongest choice and, with insurers accepting more customers on an ownoccupation basis thereby increasing the number of claims, there is even greater reason to recommend it.
One persistent issue with IP is lack of awareness, so advisers have to invest more time explaining the benefits. Providers, especially those against the conditions’ race, should take advantage of this by promoting IP. Providers need to back up their IP offerings with good processes that can compete with CIC, and commission for IP is often significantly less than for CIC too which needs to be rectified. Advisers put in more work for less income, which is not right. Some have addressed these issues so it is possible.
So let’s reduce the odds of claims being refused on medical technicalities and help more customers understand the benefits of the much undersold IP.
Emma Prescott is life office relationship director at Lifesearch