When it comes to recommending a provider of critical illness cover, Pegasus is the first name to spring to many an IFA’s mind. This is because the company is one of the longest established companies in the critical illness market, and still one of the most comprehensive and competitive.
The original Pegasus product was launched in 1991, and was one of the first to be offered through the IFA channel, which remains Pegasus’s sole method of distribution.
In a hugely competitive marketplace, remaining in the top five is far from easy, but Pegasus not only achieves this, it continues to grow. The key to success has been marketing to IFAs and ensuring that the range of benefits are among the best on offer.
Responsibility for this lies largely with brand manager Louise Callaghan, and product development manager Nick Kirwan.
Callaghan has produced a range of new marketing material which focuses on younger policyholders and the positive aspects of surviving a critical illness, and has also developed a CD ROM to help IFAs boost sales.
IFAs are kept in contact with Pegasus through a network of 12 area offices which are situated throughout the UK, and which are backed up by four dedicated healthcare sales managers. Callaghan explains it is vital sales staff keep IFAs up to date as the product has been upgraded numerous times since it was first introduced in 1991.
However, she points out that even then the product was innovative – covering 13 diseases plus child cover.
While Callaghan deals with much of the marketing and sales activity, Kirwan is known in the industry for his technical expertise.
He says the company, which is based in prestigious offices in Glasgow, is now poised to expand thanks to its financial strength. Pegasus was bought by Abbey National in 1995, which in turn had taken over Scottish Mutual.
While many critical illness products are sold as add-ons to mortgages, Kirwan believes there will also be growth in the stand-alone individual product area, where Pegasus is market leader, with a 20% share.
And while critical illness has been described as the insurance success story of the 1990s, Kirwan believes it still has vast potential, describing it as “the product of the decade”. He points out that in 1996 there were some 1.3 million critical illness policies and at the end of last year there were 1.9m.
It is an advantage, says Kirwan, that Pegasus is totally focused on critical illness, although he does not rule out offering other products in the future.
Pegasus is primarily known for individual product, but he says it can also be made available to companies as a group critical illness scheme.
With so many policies in the market, differentiation is important. Kirwan says many features of the Pegasus product have been copied but that this happens all the time in the insurance industry and is unavoidable.
The company was the first to add CJD to its list of covered conditions, which has since regularly hit the headlines. While the disease remains extremely rare, Kirwan says the decision to add it was partly driven by the beef scare and subsequent press coverage, but mainly by the request of IFAs.
The company was also one of the first to include multiple sclerosis, which now accounts for more claims than strokes.
There have been accusations that providers add rare diseases onto their product ranges, merely as a marketing gimmick. Kirwan says this is unfair: “The diseases we offer are very much driven by IFAs whose clients want to know exactly what they are covered for. In addition, covering illnesses such as CJD raises the profile of critical illness cover and helps to sell the product overall.”
Most recently Pegasus added keyhole heart surgery onto its list of diseases covered. It is believed it is the only company in the market to offer this.
Kirwan says: “We felt keyhole heart surgery was important. It is becoming more common and can have a faster recovery time when compared to open heart surgery which is massively invasive.” He adds that it is the view of some surgeons that in 10 to 15 years time almost every heart operation will be done this way.
Claims are a sensitive area, and most providers at some stage have to turn the occasional one down. But the willingness to pay claims is also a key reason why many IFAs will recommend a specific provider.
Kirwan says he describes Pegasus’s approach to claims as “sympathetic and fair”, adding that the company “never turns down claims lightly”.
However, he points out there can be difficulties with diseases such as multiple sclerosis where medical opinion can often be divided when the illness is in its early stages.
Those at very high risk of making a claim are not eligible to buy critical illness cover in the first place. Kirwan points out that some 6% of people are turned down when they apply to buy the product. A further 14%, considered to be at higher risk, pay higher premiums, or are given specific exclusions. The remaining 80% can buy the product at the standard rate.
Beyond his role at Pegasus, Kirwan is a member of the critical illness working party. He recently assisted in the preparation of its response to the Office of Fair Trading’s report on health insurance. This called on wider use of standard definitions and better methods for product comparisons.
“We took the OFT report very seriously,” he says, “and it would have been totally wrong of us to ignore its criticisms. And while benchmarking of products may not be realistic, we can certainly make products easier to compare.”
But he says the company is not expected to introduce a buy back option. This has been successful in the Australian market which some consider more advanced than the UK.
The buyback policy is an option to purchase life cover after a critical illness policy has paid out. Kirwan explains it is Pegasus’s plan to continue offering two separate policies, offered as split sums assured, and he says the costs are roughly the same.
Further improvements to the Pegasus policy, however, while currently under wraps, are expected early next year, and although the competition may continue to increase, Kirwan and Callaghan believe their company will continue to be the first choice of many IFAs.