Individual CI - Polar opposites

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Nicola Culley examines recently launched individual critical illness plans that typify both poles of the market.

In a short space of time we have seen two polar opposite individual critical illness plans come to the market; Skandia’s 56-condition all-encompassing proposition and D2C Beagle Street’s basic strictly-ABI-worded 26 definitions with 11 minute beginning-to-end purchase process.

Beagle Street’s mass market offering has been welcomed by some, while others are worrying that being too basic translates to limited consumer understanding of exclusions and not unlikely rejection at the point of claim. As for Skandia’s top-end offering, most agree that in an ideal world, where price was no issue, why would you opt for anything else?

According to Swiss Re’s Term and Market Watch 2012, while term assurance and income protection sales fell by 3.4% and 0.2% respectively, CI marched onwards and upwards with a 3.1% increase.

Skandia said CI had benefited from the fact it was a relatively straight forward area to underwrite, when compared to the complexities of IP for example.

Ian Jefferies, head of protection at the provider, said individual CI sat in between term assurance and IP in terms of sales potential because while IP was often dubbed fundamental cover, its complications held it back.

Building trust

Swiss Re’s report also highlighted the need for greater clarity in communication to build consumer trust. Jefferies said in the case of individual CI, vast improvement to definitions and an increase in the use of plain English had definitely come through in the last few years.

He said: “Providers have worked quite hard to make definitions much clearer and the use of plain English in literature.

“Innovation in the last five years has been more around processes and quicker under-writing. The more cases sitting in the pipeline means the more chance of the consumer not completing the application.”

Jefferies said the issue going forward for individual CI would be better processes in gathering medical evidence for customers with more complex medical histories.
It is an issue that will be a particular challenge for Skandia with its top-end product aimed at high net worth clients.

“We cater for people who are older who have more complex medical history and maybe more complex protection needs. The danger for providers is getting stuck in a middle ground and trying to appeal to a mass market,” he warned.

“I expect to see lots of providers to be driven by volume and continue to try to write more business year on year. That trend will take providers towards the mass market offering where competition is more around price.”

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Nicola Culley

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