If a journalist phoned you and asked you what you thought was the future of critical Illness cover in the UK, how would you answer?
Would you say it had a bright future? Can it look forward to stronger sales and growth? Or would you say that the market will remain flat?
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I don’t know about you but I hoard things. Press cuttings, articles, comment pieces, ebooks, everything. It’ s given me an opportunity to look back at some of the answers people gave to the “future of critical illness cover” question over the last twenty years. Most were very optimistic about growth. Many mention “complexity” and the “illness race”.
One article in particular stands out. It was written by high-profile protection adviser, John Joseph, in the early 1990s. The gist of the article was as follows.
“Critical illness cover is important. But each company covers a different set of conditions. And they all use different definitions. How is an adviser meant to cut through that complexity and make a sound recommendation? We need standard definitions.”
After a few years of campaigning in the media and speaking at conferences, John Joseph finally created inertia for standardisation. First came the AIFA standard definitions for six core illnesses. Then came the Association of British Insurers (ABI) standard twenty (now twenty-three) in 1999.
Thanks to John Joseph’s efforts sales of critical illness cover began to take off. The market grew. Everyone agreed that the future of critical illness cover was very bright indeed. That’s what they said to journalists then.
But are we actually any further forward now than we were twenty years ago?
Most mainstream critical illness propositions cover up to 50 conditions. That’s twice as many as the ABI standard twenty three. And most providers offer what has become know as “ABI Plus” definitions. These offer better cover by missing out some of the standard small print. Whilst this is good for the customer, and means providers pay more claims, it also means that we are exactly where John Joseph described all those years ago. Each company covers a different set of illnesses. And they all use different definitions.
The original round of standardisation created market growth. Since the product has become more diverse again sales have flat lined. And yet there is not a month that goes buy without another product launch added more conditions, partial payments and new takes on “ABI Plus”.
They may give clients comprehensive cover but they are complex and difficult to understand. So is the future of critical illness cover simpler products?
One adviser I spoke to doesn’t think so:
“You might expect a simplified product to work but it won’t in the independent market. You can’t differentiate the simplified product on price without removing one of the five top reasons for claim so only removing illnesses 10 and above is going to make almost no difference whatever, other than the perception that you’ve made the product worse. Advisers won’t sell it – why should they? Their fear is their client would get that very obscure disease at number 12 on the claims chart and sue them for not recommending a product that was available at a similar price which covered it.”
My conclusion is that product providers make the propositions more complex purely to gain more share of a market which is declining because it’s complex. The mechanics of the industry feeds our craving for complexity and stifles the potential success simplicity could bring.
Now it’s your turn: So what would you say to that journalist about the future of critical illness cover? Do you agree with my diagnosis? I would love to hear your thoughts on this subject. Please leave a comment by clicking below or leave a link to your own article.