Zurich Insurance has today launched a critical illness proposition which will allow advisers to create bespoke packages for their clients, in a move that it anticipates will broaden the market.
The insurer said its Critical Illness Enhanced product has been designed with Consumer Duty in mind.
“Instead of improving our current Select product, we introduced the third tier that broadens our footprint. So that definitely will create a new market segment for us” Tim Lewis, (pictured), senior proposition innovation manager at Zurich Insurance, told Health & Protection.
“In terms of flexibility we can hold our hands up and say we’ve got leading flexibility and optionality.
The product introduces a third tier of coverage for adults, in a “modular” approach, which allows advisers to craft individual solutions for every customer, with packages of cover that can be added or removed, giving policyholders comprehensive protection at different stages of life.
The insurer has also de-coupled child cover from adult cover, giving policyholders more flexibility at different stages of life, and introduced an optional pregnancy and early childhood cover, which can be added or removed for those planning to start a family.
Children’s cover
One of the biggest changes sits within the children’s cover part of the offering. Zurich continues to offer two levels of children’s cover, but this time either option can be added to any of the adult cover options.
“Advisers told us that it would be better if there were no limits or rules and as to which children’s cover option you could add to the adult’s cover.
“So that’s what we’ve done. You can mix and match the levels to suit that customer’s exact needs.
“The customer is only paying for things that they need, when and for how long they need it.
Currently, if a customer wants to buy coverage for future expected children, they would typically have to best adult cover in the market and then add the best children’s cover, Lewis said – “for kids that they are yet to have or may never have”.
It was this situation that helped to drive the new product, particularly in line with Consumer Duty.
“If there is not an option to remove that child’s cover they are still going to continue pay for it throughout the whole term of the policy.
“So we had to think does that represent fair value? I don’t think it does,” he said.
But with the new product, the client doesn’t have to pay for options that they do not need.
“We’ve identified this as an opportunity to create a specific option that will meet the needs of those planning on having or adding to their family,” Lewis said.
“Another change is in the definition of a child – we’ve improved our cover to include legal guardianship and also the children of a partner.”
Complexity of the market
The product can “flex and change with a customer’s need,” he said.
“That means that the adviser can have confidence that they can meet their Consumer Duty obligations over the whole term of that policy.”
“The adviser can design the product to suit the need and it will come with the appropriate risk cost.
Advisers previously commented about the complexity of the market and knowing the rules attached to each product on upgrading, adding options or removing options.
“The number of providers in the market has reduced from about 15 to about 10 so it’s reduced by about a third. At the same time the number of products in the market has tripled,” he said.
But this product tries to reduce rather than add to the complexity in the market.
“We were mindful of this.
“We don’t believe, and the few advisers we have shared this with, have confirmed that this has not added any additional complexity and the reason behind that is there are no rules.”
“What we’re trying to impress on advisers is, it doesn’t matter which customer comes through the door, there is a solution for them.
“The new product structure will allow us to continue to innovate further in the future”
Louise Colley, director of retail protection at Zurich, added: “Our enhanced approach to critical illness will allow advisers to offer crafted cover to customers at any stage in life.
“The FCA’s new Consumer Duty regime focuses the mind on creating solutions that meet customers’ needs more than ever before, rather than off-the-shelf products that may not always be suitable.
“With the ability for customers to add and remove elements of cover throughout the life of the policy, this is the only critical illness product that policyholders will ever need.
“The peace of mind this will offer customers, combined with the simplicity it offers to advisers, makes this an offering we are incredibly proud to share with the market.”
New level of flexibility
The new product and its flexibility have been analysed by both Protection Guru and CIExpert.
Adam Higgs, head of products at Protection Guru, said: “Zurich have taken flexibility to a whole new level with this new launch.
“We have seen insurers offer children’s critical illness as a standalone policy previously, however having cover for congenital conditions, pregnancy complications and birth defects as an option and separate from adult or child cover is unique.
“The changes offer advisers the ability to provide their clients with cover that fits their situation and budget and to flex this as their life changes.
“As such clients only need to pay for the protection they need without having to pay for the elements they cannot claim on.”
In its analysis of the new product comparison service CIExpert, said: “The concept is based around offering clients of all ages, needs and budgets a far greater choice.
“Being able to add to the cover or to discard those elements of the plan that is no longer required far more accurately reflects the clients’ needs both now and in the future.
“Whilst many advisers and consumers focus on simplicity, many others are focused on choice, quality and flexibility and Zurich is catering for all of these differing needs and budget with this innovative modular design.
“By rendering children’s congenital cover optional Zurich is ensuring that the cost of this cover can be removed at any time to avoid paying for coverage that is no longer required.
“This is the first major change in policy design for some years and we anticipate that it will have significant impact on the market going forward.”