21st March 2024

Unveiling the Truth: Consumer Insights Shake Up Critical Illness Insurance Landscape

In late 2023, CIExpert initiated a comprehensive market study in collaboration with Opinium, surveying 5,000 consumers to delve into their perceptions and comprehension of critical illness (CI) plans. This survey stands as the most exhaustive of its kind regarding critical illness insurance.

Among the findings, several were both unexpected and disheartening from the perspective of financial advisors. When queried about their preferred method of purchasing a CI plan, a significant majority, accounting for 85%, favoured online channels, whether through direct searches or aggregator platforms.

Alarmingly, a staggering 85% of respondents admitted to never seeking advice from a financial advisor regarding CI coverage, with 37% expressing firm reluctance toward ever considering it.

Reasons for eschewing advisor consultation included concerns over feeling pressured into purchasing and the perceived financial burden of advisor fees. The latter apprehension, in particular, appears rooted in misconceptions, potentially stemming from the Retail Distribution Review (RDR) and its elimination of commission-based compensation for investments and pensions. It's evident that perception often holds more sway than reality.

The survey delved further into the motivations behind owning a CI plan among those who already possessed one. The primary drivers included the birth of a child and apprehensions regarding personal health, with 15% expressing anxieties about the adequacy of NHS treatment. Additional factors included concerns about cancer, outstanding debts, and significant life events such as marriage or long-term relationships.

Respondents also outlined conditions that would incentivise them to seek financial advice, citing free or more affordable advisory services. This underscores the necessity for industry-wide consumer education, particularly integrating protection planning into initial mortgage discussions rather than as an afterthought.

Contrary to assumptions, the primary anticipated uses for CI payouts were to compensate for lost income during periods of inability to work and to cover routine expenses like bills and groceries. This emphasises the importance of income protection alongside critical illness coverage and underscores the need for advisors to offer holistic protection planning.

Furthermore, respondents highlighted a preference for health-related supplementary benefits, including complimentary annual health check-ups, 24/7 access to general practitioners, and second medical opinions. These benefits, often included within CI plans, are undersold by advisors despite their potential as significant triggers for plan adoption.

Moreover, there appears to be widespread misunderstanding regarding how additional payment conditions function, with 81% mistakenly believing that such claims diminish the total insurance sum. This reinforces the imperative for advisors to highlight these details to clients and emphasise the array of complimentary benefits available within CI plans, including coverage for children.

Jeff Prestridge, Group Wealth & Personal Finance Editor at The Daily Mail, aptly described these findings as a "wake-up call" for the protection insurance sector. Indeed, they should galvanise mortgage and wealth advisors to ensure comprehensive client protection against both health crises and income loss, while also reevaluating how they communicate the benefits of CI coverage to their clientele.

Alan Lakey, CI Expert
https://ciexpert.uk/

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