Perhaps surisingly incoming critical illness (CI) enquiries appear to have fallen away as the pandemic has taken hold in favour of income protection (IP), advisers have told Health & Protection.
However insurers are continuing to develop their offerings by moved to providing more layed products while child cover is now more than just an afterthought for providers.
“We have not seen an increase in interest for critical Illness cover across our clients in the last year, we are actually finding most clients are interested in income protection which we have seen a significant take up across business and personal clients,” Charlie Cousins, founder at Hooray Health & Protection, told Health & Protection.
Andrew Wilkinson, director at Moneysworth Life Insurance, agrees – attributing the trend to the pandemic.
“I can only really put that down to the pandemic. It’s made people have more of a think. We do still get critical illness enquiries but not so much,” he said.
“They tend to be mortgage related quite often. Somebody wants critical illness so the mortgage is paid off if there’s any problem.
“I think it depends on what your circumstances are as an individual. If you’ve got a reasonably paid occupation and in the family there is quite a lot of money then I don’t see why critical illness would drop off for that part of the market.
“There’s maybe more people taking a smaller amount of critical illness, taking a smaller part and taking that as a lump sum, a sort of rainy day fund, £50,000 or something like that, but I do think we will see more of a push towards IP,” he adds.
But offering a provider’s perspective on the issue, Hilary Banks, sales director at Guardian, told Health & Protection that the right fit for the client depends on their protection needs and what they most value.
“Life cover can seem easier to sell because it comes at a lower price point. But it doesn’t fully address most people’s protection needs. Critical illness costs more but that’s because sadly, getting a critical illness before the term of the policy expires, is more likely to happen. The same applies for income protection.
“We’d encourage advisers not to shy away from the conversation around CI because of the price, but really explore what the customer values about their lifestyle and how much peace of mind it would give them to protect it.
“For many it might not be about covering their entire mortgage, but having at least some cover in place could buy them time to come to terms with any diagnosis, and make more informed financial decisions.
“Many policies also offer support such as counselling or help with legal matters which can prove very valuable if someone takes ill.
“We strongly believe there’s an important role for critical illness cover.”
Positive media coverage
The pandemic has also underlined the value of critical illness cover, as positive media coverage around the difference such cover can make has changed conversations with clients, according to Naomi Greatorex, founder of Heath Protection Solutions.
“Over the last two years people have been really worried and bringing in stories of how people have been able to claim on their critical illness into the national press around coronavirus has definitely been a benefit, so any stories around that have been useful.”
Return of two tier products
In terms of product design, there has been a definite move from insurers towards a two tier product, Greatorex adds.
“That’s really the major shift in the market over the recent period. It is this core and enhanced cover that you see more and more providers moving towards.
“The biggest shift in the market is having a different type of conversation now with your clients because there are more products which have divided into basic, core and enhanced which in a lot of ways is good as it offers a different way to have a conversation with your clients. It’s about costs versus quality.
“I know insurers that haven’t already are now also looking to divide their products. Previously, you had each insurance company offering one critical illness plan with one set of definitions and as we have progressed you’ve seen more insurers bringing out a core and a plus range – one with a more basic contract and one with more enhancements for the client.”
Alan Lakey, director at CI Expert, agrees that in recent years insurers have shown an appetite for offering the choice of a core and a comprehensive plan.
“This harks back to the early days of critical illness from 1985 to 1990 when insurers tended to offer a basic plan covering maybe 12 conditions with the option of paying extra to obtain wider cover with another 10 or 12 conditions.
“I know other insurers are exploring this dual approach so I imagine it will be used industry-wide within a few years.”
LV= appears to be one of those insurers reviewing its policy.
Last month the insurer told Health & Protection it was planning a simplification of its CI product line which will allow a more flexible approach to the cover for advisers and their clients.
Focus on children
According to Lakey, another key area of focus for providers has been on children’s critical illness cover with child-specific conditions such as muscular dystrophy, cerebral palsy, Down’s syndrome and spina bifida being widely offered.
“Child cover is now optional with a number of insurers which helps in reducing the core cost, something that remains a major driver for sales,” he continues.
“Child cover was added within the product almost as an afterthought but until recently insurers simply covered children for the same conditions as adults.
“It is only within the last 10 years that particular attention has been paid to child specific conditions and once one insurer does this the others tend to follow and play a game of one-upmanship.”
Prohibitive pricing
Ultimately though, Critical Illness product innovation will make little difference unless the situation with pricing changes, according to Hooray Health & Protection’s Cousins.
“The main feedback we have from our clients is the product is too expensive which has been the reason given for 90% of the opportunities closed on our CRM,” he says.
“We will continue to see slow growth in the market unless pricing improves dramatically.”