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Analysis: Critical illness upgrades

A change for the good or just product tinkering?

2018 was a year of product alterations in the critical illness market, but will the changes really benefit consumers in 2019 – or are they just for show? Emily Perryman finds out.

“Product tinkering” and “conditions race” are criticisms that are often levelled against critical illness (CI) insurers, yet 2018’s raft of product changes have been welcomed with open arms by protection advisers.

Providers such as Legal & General, AIG, Scottish Widows, Royal London, Zurich and Aviva all got in on the action, revealing a range of product alterations they insist will result in better coverage for consumers. Although some changes appear to affect a tiny proportion of the population – for instance, the addition of craniosynostosis to L&G’s Children’s Critical Illness Extra plan – others are considered to be major enhancements.

“The standout changes that resonated with LifeSearch advisers are the advancements made in children’s CI cover,” says Tom Baigrie, chief executive of LifeSearch. “We see plenty of claims in this most emotive area, so appreciate Scottish Widows’ introduction of child specific conditions, Aviva’s £25,000 payable irrespective of the overall cover, and Royal London increasing their potential pay-outs to (the lower of) £50,000 or 50% of the parent’s sum assured.”

Product innovation

Royal London, in particular, has been congratulated for taking an innovative approach to children’s CI cover. Policyholders can choose to include children’s cover or not, they can choose enhanced options, and they can change their choices throughout the policy term.

“This is uniquely reactive to life events and also doesn’t force people to pay for children’s cover if they don’t have children,” explains Kathryn Knowles, managing director at Cura Financial Services.

More recently, Royal London removed the requirement for surgery if a policyholder is diagnosed with low grade prostate cancer. Alan Lakey, of CIExpert, says this is a welcome move because in the majority of cases a doctor will recommend active surveillance of the condition rather than surgery.

“If someone has early stage prostate cancer it may never become serious. However, it is a worry, they might have several biopsies and they’ll have regular trips to the hospital. It is only fair that plans are worded in a way that claims are paid,” he says.

Zurich, meanwhile, revamped its CI cover alongside income protection, introducing two new levels of cover: Core, which offers entry-level cover; and Select, which gives more comprehensive protection.

“Zurich now offers two-tier plans, with Select being a very high quality cover,” says Lakey. “It has also introduced the condition ‘bowel disease’, which incorporates some existing conditions and some new ones. Consolidating conditions this way is a good move.”

Advisers also saw an industry first from AIG when it added sepsis to its CI cover. “Sepsis is fairly common in hospitals so this seems to be a valid addition,” Lakey says.

Increasing choice

Overall, the product changes are viewed as positive for consumers, rather than mere product tinkering or one-upmanship on the number of conditions covered.

“The CI market now has far more choice between quality and price than ever before and definitions are far broader than this time last year, meaning more claims will paid,” says Adam Higgs, head of adviser services at F&TRC. “Along with broadening definitions a number of insurers have also looked to simplify their definitions meaning less ambiguity, which is also a positive for consumers, however far more could be done in this area.”

Advisers reckon the most innovative change in the CI market is from new insurer Guardian. It is the only insurer that covers children up to age 23 if they are in full-time education, thereby catering for those taking a gap year. It covers brain tumours on diagnosis alone and introduces simple terminology on conditions like heart attack.

Guardian has also guaranteed to add any future upgrades to existing plans, which Peter Chadborn, director at Plan Money, says is a welcome move: “It makes the premium more expensive but clients like the sense of fairness; that they are less likely in the future to be unwittingly stuck with a policy which is inferior in terms of breadth of cover to new policies on the market.”

More to do

Although the changes are mostly positive, advisers think there is still more that insurers could do to increase take-up and improve cover.

For example, Cura’s Kathryn Knowles says many of her clients have pre-existing health conditions and struggle to get CI on the standard market.

“We are trying to encourage insurers to develop CI policies that improve accessibility to insurance,” she says. “It isn’t fair that someone that has had a heart attack cannot get a policy the covers them if they are diagnosed with cancer.” 

Others think insurers need to do more to highlight the positive impact of policies, be more transparent on why claims are not paid and simplify their policy wordings.

“We do see customers getting confused – sometimes by unscrupulous salespeople – between CI cover and terminal illness benefit (TIB), and it would be good to see all TIB carry a clear warning that it is not to be confused with CI,” says Baigrie.

“And, as we’ve been saying for a decade now, a campaign to increase consumer awareness of the product would pay huge dividends. We are inundated with TV advertisements for over 50 plans, but see nothing for CI. Could the leading insurers get together to make a difference here?”

Greater complexity

There is also a concern that the constant stream of product enhancements actually makes it harder for advisers to sell CI.

“Unless advisers are sufficiently knowledgeable and have access to a tool like CIExpert they could easily become confused,” warns Lakey. “The market is getting more complex because there is greater variation of plans and more conditions. A lot of advisers don’t understand what the conditions are. If they can’t answer a question like ‘what is Devic’s disease?’ why would a consumer buy a plan from them?”

Moreover, Rob Harvey, head of protection advice at Drewberry, points out that while the recent updates are welcome, especially the improvements in definitions, it is hard to tell whether that will influence clients’ choice when buying protection cover.

“Where an adviser can step in is to highlight the importance of getting robust definitions of various illnesses to ensure the policy will pay out for the conditions someone like the potential policyholder is most likely to suffer from,” he says. “This can be done with specialist software that ranks each provider’s proposition in this order.”

Dean Mason, owner of Masons Financial Planning, adds: “I think [the changes] make the policies better value for consumers, but it’s important that advisers do point them out as the public are notorious for not reading the small print.”

Too many tweaks?

In general, advisers believe insurers are making product tweaks too frequently. Legal & General, for example, made three lots of product updates in 2018 alone.

Craig Brown, director of Legal & General Intermediary, claims the updates were a direct result of listening to intermediaries and their feedback. “It means more choice of cover for them and their clients. It’s all part of our goal to have a range of products designed with intermediaries for intermediaries,” he argues.

Brown adds that L&G helps advisers to keep up to date with the changes via its Adviser Centre, face-to-face support, webinars, masterclasses and telephone account managers.

However, Lakey claims it is hit or miss whether insurers let advisers know about product alterations.

“Insurers don’t generally email us and tell us about the changes – we might get an advert a week later, but it’s not obvious that it’s a product upgrade,” he says. “I’d like to see emails that say, ‘these are the changes and this is what they mean in plain English’.”

Whether insurers take advisers’ comments on board remains to be seen, but with more product updates on the cards in 2019 it looks like the industry is set for another year of tweaks, tinkering and (hopefully) innovation.