Having considered both insurers and reinsurers, the next element of the value chain is the distributor – the first contact most potential customers have with the product they will buy. If we ignore over 50s guaranteed acceptance whole life plans, protection insurance distribution is dominated by advisers, brokers and specialist intermediaries.
So, are advisers always consulted before changes are made or new products are introduced? Alan Lakey is a top adviser and the founder of CIExpert, and his views on this important topic are telling…
Insurers often state that they market test new product designs with advisers and, as often as not, later lament that the anticipated new business increase did not occur. It begs the question as to the efficacy of market research because whilst many advisers will be knowledgeable regarding critical illness plan design many others remain committed to their favourites or continue to play the premium game regardless of the relative quality trade-off.
As an adviser I have never been asked about future product changes however, as a director of CIExpert, I have been heavily involved in consultancy for many insurers which has led to markedly better policies and claim outcomes for clients. As CIExpert is used by most insurers and reinsurers it serves as a catalyst for uplifting quality as opposed to tinkering with less important aspects, such as adding conditions that result in few claims.
Both Guardian and AIG have raised the stakes in recent years with unique features that other insurers have been slow to copy. The pandemic may be one reason for this, however, another is the continued fixation with premium, a flawed rationale that continues to drive many advisers. This stance helps explain the twin-plan approach that many insurers have adopted – aim for quality but grab business from those advisers that focus on cost.
What next for critical illness? Well, first we need to look back to see how plan design has morphed over the years. Until 2007 there was a gradual increase to the number of conditions included, which improved the value of plans making it easier for advisers to upgrade their clients.
This changed in 2007 when all insurers adopted the revised model wordings courtesy if the triennial ABI critical illness party review. These changes dumbed down the coverage and reduced the ability to successfully claim due to substantially harsher claim wordings. We then entered into a period known as the ‘condition race’ where each insurer attempted to convince advisers of their policy’s worth by adding ever more conditions, often regardless of any beneficial impact. Around 5 years later, impacted by a number of new market entrants – AXA, Royal Liver and Fortis – all offering generally superior claims wordings the market managed to clamber out of the 2007 quality abyss.
We then entered a golden period where additional payment conditions proliferated, particularly early-stage cancers, a sound move that added greatly to the value of the cover and provided confidence to consumers. After all, how many consumers are aware of the difference between aggressive cancer or in-situ cancer? To them it is simply cancer and having a claim declined for having the wrong type of cancer sends the wrong message.
Plan improvements have continued with a greater focus on children’s critical illness coverage and the inclusion of child-specific conditions such as Down Syndrome and Spina Bifida as well as a children’s death benefit. Latterly we have seen the spotlight fall on added benefit services with extremely worthwhile additions such as 24/7 GP access, second medical opinion and free health MOTs.
We have also witnessed a narrowing of the gap between critical illness plans and Vitality’s serious illness cover. Both have edged towards the other and it may be that the difference is eventually seen as minimal.
For the future, the overall trend should be to cover the mental or physical outcome and not plain adherence to a condition name. This is logical as it cements the relationship between insurer and client and bolsters confidence in an industry that for decades has fought consumer distrust, frequently of its own making.
The future looks bright for critical illness because there has never been a higher level of competence with regard to product design and with insurers trying to do the right thing. The aim should be to enfranchise those policyholders who suffer debilitating outcomes regardless of whether the actual condition is named in the policy. The major conditions are already included so the addition of relatively rare peripheral conditions should have a minimal impact on cost. With neurological conditions there are numerous rare but devastating illnesses that cause permanent loss of motor function or permanent deficit yet fall outside the scope of most plans. Thus far, only AIG has had the courage to introduce a claim wording that encompasses these.
Nonetheless, there is much more to do in this area as there is with the profusion of condition names. Insurers are using four or five different names for the same condition - such as respiratory failure - and this invariably translates into confusion amongst advisers and consumers alike. This is an area calling out for conformity with a resulting simplicity.
Another matter requiring a rethink is the design of policy and key facts documents. As somebody who spends far too many solitary hours leafing through these tomes, I can state categorically that they are too wordy. They are generally difficult to navigate and oftentimes spoiled by a range of fonts and the use of groovy colour schemes that detract from the reading experience and make photocopying pages nigh on impossible. Do we need pictures of grinning families? Obviously each document has to meet certain regulatory requirements but needless repetition and confusing verbiage needs eradicating.
The signposting initiative has already proved a success with firms like Vita and Future Proof assisting introduced clients from various firms. However, we need to persuade more advisers to integrate protection into their everyday work. Many years back Sun Alliance offered two options to non-standard applicants – pay an extra premium or have a condition excluded whilst retaining the standard premium. This approach offered choice and resulted in advisers showing a greater interest in non-standard lives. Surely, in today's digital age, this is achievable fairly easily?
Without doubt, today’s plans are vastly superior to those from ten or fifteen years ago, particularly for females. CIExpert provides an evaluation allowing advisers to readily understand plan differences so that an informed choice can be made – an essential requirement when reviewing client plans.
Alan Lakey, CI Expert