Skandia Life launched its award-winning critical illness plan in 1991 and has never looked back. Now the product – which is sold only through IFAs – has a sum assured of over £3 billion and is one of the market’s leading success stories.
Critical illness was introduced to the UK from South Africa in 1986. Its original name was `dread disease cover’ and it was slow to take off at first.
Skandia decided to develop a product which was `state of the art’ according to life marketing manager, Lynda Cox.
The Skandia Lifetime Plan took off immediately, she says, easily beating its high sales targets from the start. Last year, sales increased by 191%.
Key to its success is the fact that the product has been regularly upgraded. Other insurers simply launch new contracts. This leaves those with an existing policy with worse cover and possibly paying the same or even higher premiums.
The Skandia Lifetime Plan has been upgraded seven times since its launch with improvements provided to existing clients at no extra cost.
Recent improvements to the contract include loss of independent existence, Creutzfeldt-Jakob disease and coma. Skandia was also the first insurer to add bacterial meningitis to its children’s benefit.
As Cox says: “I believe Skandia is the only UK life company which can point to a consistent record of providing improvements in cover. It demonstrates our commitment to add value to any IFA recommendation.” Skandia regularly holds training seminar workshops throughout the UK for its IFAs, most recently focusing on upgrades to its critical illness policy.
Cox stresses that Skandia does not and has no plans to set up a direct sales force, and will continue to sell only through regulated IFAs.
But she emphasises that critical illness, like life assurance, needs to be effectively sold since it is not bought voluntarily.
IFAs, she says, need to tell their clients that the attitude `it will never happen to me’ is a common, but misplaced one. “As claims records show, critical illness is indiscriminate and `it’ does happen,” says Cox.
Once the client has been convinced of the need, then IFAs will find the product has wide appeal. Critical illness is ideally suited to single people as well as those with dependants. Cox says: “IFAs need to tell their clients that CI cover is for everybody, and in particular single people. If someone living alone is taken ill, they need to ask themselves who will provide an income, who will pay the bills.” She points out a single man could buy £100,000-worth of cover for as little as 70p a day. Cover is available from £l5 a month, although Cox points out that the average premium is around £40 a month.
Children’s benefit is automatically included in a Skandia policy at no extra cost. This covers natural, adopted and step-children and to date, Skandia has paid nine children’s claims.
Research has shown that one in 60 children under the age of 15 will develop cancer.
Clearly, no one wants to think about contracting a critical illness. But having a policy buys peace of mind. And should the worst happen, the policyholder needs to know their claims will be paid with a minimum of fuss.
Skandia is proud of its claims record. Cox points out that the insurer has to date paid out over £13m in claims and its average payout is almost twice the industry norm at £81,000 compared to £42,000.
A useful tool in the IFA’s marketing armoury is a brochure for clients produced by Skandia showing real cases of those who have received CI claims.
Among those illustrated with a genuine photograph is IFA David Hamilton. He regularly advises clients of the need for CI cover and had himself taken out the Skandia Lifetime Plan to protect his own future. And as a small businessman, he saw the contract as being a practical way of providing keyman cover.
Some months ago Hamilton was given only hours to live when he suffered an aneurysm of the aorta – the body’s largest artery which feeds all the major organs including the brain. Fortunately surgery was a success and he is convinced the payout for £88,000 speeded his recovery.
Now Hamilton tells clients: “I firmly believe that critical illness cover should be the linchpin of anyone’s insurance arrangements.”
For a claim to be paid out, Skandia will forward a claims form to the patient or their family and when completed, verification will be requested from their doctor. Once this is obtained, payment will be made – Cox explains the whole process can take just three weeks. Delays are often as a result of a tardy doctor not completing the necessary paperwork.
To date, heart disease, cancer and stroke account for two thirds of all Skandia Lifetime Plan claims. The breakdown is cancer 49.66%, heart disease 16.55% and others 31.03%.
Skandia’s marketing director, Bill West adds: “Our plan is designed to pay out money and our claims record is very important. We publish a full listing of our claims and regularly produce case studies.”
Not everyone will be eligible for critical illness cover, but the vast majority of an IFA’s clients will be. Cox says that 85% of those applying will be accepted on standard terms, 10% will be accepted on nonstandard terms – that is, paying a higher premium with the remaining 5% declined.
A high degree of underwriting expertise is required, with a potential policyholder’s height and relative weight taken into account. Family history of diseases such as heart attacks and cancer will also be taken into consideration, and naturally smokers will pay more. Of course some heavy smokers may try and deny their habit in order to pay a lower premium, but this is where the IFA can come in. Cox says: “We expect them to know their clients and to help us by supplying an accurate picture of the policyholder.”
IFAs also need to point out to the client that cover is flexible. It ranges from maximum which is guaranteed for 10 years with no increase in premium, to standard where cover is projected to last throughout the client’s life. The plan allows the client to increase the premium and cover each year without medical evidence.