L&G quizzes intermediaries on future direction of the market
IFAs believe reviewable critical illness (CI) premiums or income protection-based products will be the two most viable alternatives if guaranteed rates on CI cover become unaffordable in the future.
These were the main findings of research recently conducted by Legal & General (L&G) among 400 IFAs. The insurer carried out the study in a bid to learn what IFAs want to see in the next generation of CI products.
According to the study findings, half of the advisers polled said they would recommend reviewable rates if guarantees become over-priced, with the other half opting for alternative products, including income protection-based offerings.
However, the research also revealed that the vast majority of IFAs are still recommending guaranteed rates and do not believe they will become unaffordable in the short-term. The study concluded that new products should not be based on radical new designs, but evolve from today's model.
Despite taking part in the study, Jason King, director at LifePolicies Direct, disagreed with some of the findings.
"I generally agree with the outcome - future products should evolve from existing products. As we've said before, critical illness cover isn't broken, so don't try and fix it.
"However, I do not agree that critical illness cover should be combined with income protection. Our clients would prefer lump sum payouts, with guaranteed definitions and guaranteed premiums, but with some total and permanent disability underpin on payouts. Alternatively, reviewable prem- iums would be accepted by the consumer in return for no total and permanent disability underpin, as long as the review policy is sensible and fair," he said.
The study also claims IFAs want new CI products to be simple, flexible and compliant with the Association of British Insurers' statement of best practice. This includes having common definitions to keep product comparisons simple.
Graham Newitt, managing director of intermediary solutions at L&G, said the research had highlighted some important issues. "This reinforces the fact that IFAs still favour today's guaranteed critical illness products and believe their customers are prepared to pay for guarantees.
"This research will ensure that IFAs' views will be an important influence when, at the appropriate time, new products are developed that meet the needs of insurer, reinsurer, intermediary and customer," he said.
