Three in four advisers think an enhanced terminal illness definition is a feature customers value highly enough to pay more for, according to research by Guardian and IPipeline among 345 advisers this summer.
The research findings follow the Financial Conduct Authority (FCA) review last October into terminal illness benefits offered within life insurance policies which raised several serious concerns about the benefit.
At the time advisers also told Health & Protection that terminal illness benefits were delivering poor outcomes and consumer harm in some instances as issues persisting with claims not being paid.
Six months later in April, providers said they had been considering responses addressing the FCA’s report while advisers reiterated they needed further action from insurers on terminal illness.
Guardian noted that one conclusion of the FCA review was that there was scope for the industry to consider offering an enhanced definition and the review also acknowledged that an enhanced definition was likely to come at a greater cost.
According to the survey, 74% of advisers thought customers would pay more for an enhanced definition.
Of those, 45% thought customers would pay between 5-10% more, 35% thought up to 5% more, and 16% thought customers would pay between 10-25% more.
A small minority (4%) said customers would pay over 25% more.
When advisers were asked if they felt confident explaining the difference between an enhanced and industry-standard definition, 90% said they did.
In contrast, more than half (52%) said they thought customers did not yet understand the difference.
Important advisers can differentiate definitions
Jacqui Gillies, marketing and proposition director of Guardian, (pictured) said: “We’re pleased to see most advisers think customers value the enhanced terminal illness definition and would be willing to pay more for it.
“That’s good to know as it’s a more expensive definition to offer.
“We’re also pleased the majority (90%) of advisers said they felt confident explaining the difference between the two definitions on offer.
“There will always be the more price-conscious customer, who can’t or chooses not to pay more for an enhanced definition.
“But the most important thing is that advisers can confidently position the difference so their clients can make an informed choice.”
Guardian said it offered an industry-standard and enhanced terminal illness definitions.
In 2023 it paid all life and terminal illness claims on its Life Protection cover with a third (five of 15) paid at the time of initial claim, despite not yet having a 12-months to live prognosis, the insurer said.
This was mainly because the enhanced definition pays out on incurable Stage 4 cancer regardless of life expectancy and 93% of it’s terminal illness claims in 2023 were due to cancer.
Ian Teague, senior VP and managing director, UK & Europe at IPipeline said: “It’s great to see that advisers and clients value the choice of terminal illness definitions, with 90% of advisers confident in explaining the differences.”