2015 saw a big life office return to the critical illness market – could that be a sign of a resurgence in confidence in this important product? Sam Barrett rounds up the year
Its simple lump sum payout and obvious link to a mortgage has made critical illness (CI) insurance a popular product with consumers. But, while it’s captured the public’s attention more than some protection products, the CI industry is keen to increase take-up further.
Figures from Swiss Re’s Term & Health Watch 2015 indicate that the market is performing well again. Over the course of 2014, the number of new CI policies, stand-alone and accelerated, increased by 4.4%. However, with new sales at 465,439, they remain some way off the 560,911 sold in 2012 to take advantage of gender specific pricing.
Hopes are pinned on the latest Association of British Insurers (ABI) Statement of Best Practice to push sales further. Published in the last couple of weeks of 2014, this aims to make the product easier to understand as well as reducing the number of claims that are turned down.
In addition to including clarification of the difference between additional and partial payments, the new Statement of Best Practice also brings the heart attack definition in line with clinical practice.
As insurers had under until the end of 2015 to implement the changes, it’s been a busy year for product development teams as many chose to use the update as an excuse to improve their plans.
Among those that made improvements was Aviva, which enhanced definitions for seven conditions, including multiple sclerosis, Alzheimer’s disease and blindness, and added ulcerative colitis as an additional benefit.
Bright Grey also made a number of changes, including full payment and severity definitions for cancer, heart attack and children’s CI cover. It also boosted the maximum payment available under its severity definitions to the lower of £25,000 or 25% of the sum assured.
Aegon added a carcinoma in situ of the breast definition, an early form of breast cancer, to replace mastectomy. This is an additional CI benefit which pays 25% of the benefit amount, over and above the original benefit amount, up to a maximum of £25,000.
Changes also took place at AIG Life and Legal & General. While AIG enhances its CI cover to deliver comprehensive family protection, L&G took the opportunity to add spinal stroke to its plan.
The need for support and advice following a diagnosis of a critical illness was also recognised by some insurers. For example, in February, Bright Grey, which subsequently rebranded to Royal London, extended its Helping Hand facility, which is provided by RedArc, to include access to a second medical opinion service. This means that as well as being able to access practical and emotional support, policyholders will be able have a face-to-face second medical opinion.
Similarly, in July, Legal & General introduced a second medical opinion service in partnership with Healix Health Services. Like Royal London, this provides a face-to-face meeting with a consultant specialist to get an independent second opinion if the make a claim. The insurer will pay up to £300 for this consultation.
While insurers focused on new benefits, some old faces also returned to the CI market. Canada Life returned to the individual protection market, initially launching level and decreasing term life insurance products through the CanProtect brand with the option on both to include accelerated CI. This covers 42 core critical illnesses and 16 additional conditions that qualify for a partial payment.
Scottish Widows also returned to the adviser market with its digital protection proposition, Scottish Widows Protect. This offers a range of cover options for individuals and businesses, including a standalone CI product and life with CI, on a bespoke online platform.
Unsurprisingly, claims remained an important focus for the industry too, with all the insurers publishing their statistics over the course of the year. These included Aegon, which paid 93% of its claims, Aviva, which paid 93.2% of its claims, Vitality, which paid 91% of its serious illness claims, and Zurich, which paid 91% of its claims in 2014.
In addition, industry-wide statistics were published by the ABI. Also covering 2014, these showed that 92% of CI claims were paid, up from 80% in 2005, with the average claim paid, £67,039.
Many of the individual insurers went a step further too and broke down their statistics to highlight the conditions which generated the greatest number of claims. For example, at Aegon five critical illnesses – cancer, heart attack, stroke, multiple sclerosis and benign brain tumour – accounted for 91% of all CI claims. Cancer alone accounted for 64% of claims in 2014, followed by heart attacks (13.5%) and strokes (8%).
But while it was happy to publish the statistics, Aegon was also critical of the way the industry uses its claims statistics, with its protection director Dougy Grant stating that there was still a perception among consumers that only half of CI claims are paid. As a result, he called on the industry to pull together to make better use of claims statistics and help dispel this myth.
Going forward, gaining consumer confidence will be essential if CI sales are to reach the heights many believe they deserve.