19th July 2010

CI Transformation and the role of the adviser

Critical illness insurance has been undergoing a gradual transformation, which may have escaped the attention of casual observers.

During the 1990s the product providers were caught up in a numbers game where new conditions were constantly being added, seemingly with the sole intention of appearing superior through the sheer volume of conditions.

Overtly this may have appeared a sensible marketing ploy as many advisers were persuaded to use insurers with a high number of conditions irrespective of other considerations. However the emergence of specialist protection advisers, who look beyond price and name awareness and also choose to peer below the surface, has presaged a transformation.

We are now seeing an appetite for additional and valuable cover for conditions like early stage prostate cancer, coronary angioplasty, mastectomy and severance of one limb. Statistically these are far more likely to result in a claim than minor conditions such as Encephalitis, Aplastic Anaemia and Liver Failure.

These advisers scrutinise definition wordings rather than make assumptions from the barest information within the key facts brochures. They seek to assess the worth of a condition and compare the claims wording with that of competitor companies. No two plans are identical, a fact as true today as back in the confusing period of the 1990s before the ABI set up its critical illness working party and standardised the wordings of the main conditions.

Primarily, there are two methods of assessing the most appropriate plan. One is to guess, using prejudice, assumption, name awareness, cost and convenience. The second is to work out the most important aspects for the particular client. For a 50 year old male smoker then those providers offering superior heart disease and cancer cover will prove more pertinent. For a 25-year-old non-smoking female the differences are less obvious but as the plan is likely to run for 25 years or so it is sensible to pay attention to the potential claims in later life. This is where mastectomy cover proves its worth, as, for a 45-year-old female, it is twice as likely as heart valve surgery, blindness, major organ transplant and multiple sclerosis.

My belief is that if providers see that critical illness sales are driven by premium and not by reference to quality they will dumb down the product and treat it as a commodity. Plan designs will become less comprehensive and advisers will be under threat from online bucket shops. It is in our hands to ensure that this future does not come to pass.

Alan Lakey
Highclere Financial Services

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