With changes afoot in the critical illness market, Owain Thomas asks if its time for the sector to put aside its differences and move forward
This has been welcomed by most within the provider community as Chris McNab, CI product manager at LV=, explained.
“The new headings will definitely help people understand it. TPD’s problem was that it was whatever different providers wanted to call it, so it’s good that we will all have the same headings. It’s very clear to advisers and customers that it is permanent and it has to be total. The clearer title and definitions should hopefully get rid of some of the claims we see for people who just don’t meet the definitions.”
However, there are those who have vocally argued the exact opposite, suggesting that including the word “total” does little but add confusion to the subject – in effect, inferring a claimant must be either in a coma or quadriplegic to fulfil the definition.
Time will tell, but the ABI also vowed to implement an education programme alongside the simplified definitions that it hopes will enhance the clarification and understanding.
McNab has also been encouraged by the trend to introduce partial payments for certain illnesses.
“I expect to see an increase in this,” he said. “We’ve had good feedback from advisers on partial payment, with the adviser market saying it does appreciate it and we think consumers do as well.
“We’ve just added mastectomy and prostate cancer and see value in how many cancer claims there are, especially around mastectomy.
“A sum such as £25,000 for a mastectomy can go a long way – maybe with reconstructive surgery or just to take a holiday.”
The renewed focus on product development, rather than simply adding illnesses that provide little or no worth, seems to be a welcome move in the market.
For too long, it has been a case of providers competing by numbers. But now, the spotlight has been repositioned to highlight the quality of conditions covered, as typified by the more prominent use of ABI+ definitions. As Sheila Hall, head of reassurance, pricing and protection development at Aegon, told COVER, she felt more encouraged with recent developments.
“Generally, the protection market has more of a product development feeling about it at the moment.
“It’s been more about development than presentation, in which the numbers game was some kind of scoring competition as to who could reach 50 definitions. Instead, providers are now looking through their definitions and asking can they make it ABI+ and in light of medical advancement, how should they be structured?
“That’s a positive sign because for too long we were playing the numbers game,” she added.
Partial payments
Like this spell of definition catch-up, Hall welcomed the increased leaning towards partial payments, which she believes is targeting a genuine customer need and is something that can be helpful to advisers.
However, when it comes to the potential formation of simple products, Hall suggested that the industry should be increasingly mindful of the potential to up-sell.
“It would be quite interesting to have the sort of upgrade option [as suggested by Lakey], but I can see a split by distributor as much as having this up-selling,” she said.
“We should always be thinking about how advisers can up-sell to their customers as people have more money to spend on their protection and as their requirements change. Rather than having people lapse a policy and take out a new one, we should make more use of features to extend what you have.”
Despite all this activity over recent months, the CI market is unlikely to see a short-term revolution. Rather, as most within the sector expect, the steady evolution will probably continue on its way for the next 18 months.
Although the necessary introduction of the SoBP provides the opportunity for insurers to lift the bonnet on their products for a more substantial overhaul, it is the end point that proves more intriguing.
As Hall concluded: “There are so many changes coming together on that timeline that December 2012 is going to be a very busy month in our industry.
“Looking at the timelines for gender directive changes [where products can no longer be underwritten or priced on gender as ruled by the European Court of Justice], it is a similar implementation timeline to the SoBP. I just wonder if people will take in those things together.”
Perhaps by then, simple protection products will be in the mix and TPD more fully understood with claims rates approaching those of the more typical conditions.
For those still around to blow out the 27 candles on the CI birthday cake in 2013, it could be a very different landscape.
