There are several factors to take into account when arranging individual critical illness (CI) cover for your clients, not the least of which is wondering if you should be doing so at all, but more of that later.
Perhaps you are approached by someone requiring such cover, triggered by his or her taking on a larger mortgage. They have no dependants and their main objective is to make sure that the loan is covered should they have a heart attack. Take the following statement for example: “I want the plan to pay out to me, not to someone else after I’m dead”.
Straightforward enough, establish the sum assured, research the contract and premiums, make the application and it will be accepted on normal terms. But life is rarely so simple.
The medical questionnaire The first issue to deal with is completing the medical questionnaire. Your client may look like Steve Redgrave, but you never know what he is about to tell you about his own or his family’s medical history.
He may break down when he tells you that his father died of a heart attack at the age of 41, and you need to be prepared to deal with that situation gently and with empathy, without becoming frozen with embarrassment.
As a trusted professional, clients will confide in you and you need to be worthy of that trust. There is no one system or method that I can suggest to assist you, and you will certainly hear stories that you find difficult and painful.
A case in point I wept with one particular client when she spoke for the first time in years about her disastrous decision to have an abortion which resulted in a stay in a mental hospital on suicide watch. “I made the wrong choice,” she said.
Before meeting the client for the second time, I had prepared two sets of documents, one with a company offering the cheapest premiums and (of course) tightest underwriting criteria, and another offering more leeway at a higher price.
As the client described what had happened, I knew that even though this was a one-off life event her application might be rated, declined or have an exclusion, so it was obvious which application I would be using.
When it was appropriate to do so we discussed the implications, including the fact that her doctor would be contacted for further information. I suggested going ahead to see what terms the insurance company would come up with, and said that we should meet again once we had received a response.
We duly met again a few weeks later and spent some time going through her options. We were both pleased that she was accepted for CI cover on standard rates, but there was an anxiety and depression exclusion on the total and permanent disability and waiver parts of the contract.
The client was happy to accept those terms. “Something horrible happened, which traumatised me,” she said. And there, but for the grace of God, go any of us.
Walk with the client The majority of CI applications are accepted at normal rates, with only around 13% rated or declined. But there is another statistic about CI cover which I think is particularly important – that only one in four of us has it.
I personally believe that one of the main reasons people do not apply for this sort of cover is because they do not want to answer the medical questions, or believe that if they do, they will be rated or declined.
This certainly applied to my client, who avoided the issue for many years. It is up to us as independent financial advisers (IFAs) and intermediaries to find ways of encouraging clients to apply for all types of health cover.
Some put great pressure on the client to apply, or use the fear factor, but it seems to me that the comfortable way to make sure that you maintain a long-term relationship with your client, writing business that stays up and running even under delicate circumstances, is to walk with them.
And finally, back to my first point. Even to those who specifically demand stand-alone CI cover, I am sure that you are aware that the premium difference between that and combined life or CI is negligible.
My client still remains unconvinced of the need for death benefit, but as we look at the small print of the contract which states that she must survive 28 days after a heart attack in order to make a claim, I can see that this has made her think. Particularly as the extra cost for life cover, in this case, would be only an extra 20 pence a month.
Ruth Whitehead is principal of Ruth Whitehead Associates