It has been over a year since the ABI issued its Statement of Best Practice for critical illness (CI...
It has been over a year since the ABI issued its Statement of Best Practice for critical illness (CI). The Statement was a reaction to the OFT's criticism of CI polices a year earlier which accused them of being too complicated and that the large number of wording differences were confusing customers and making it difficult for the products to be compared, and the best, easily identified.
The ABI issued deadlines for changes in the clarity and in the use of generic terms in the wording of CI schemes. So have these new standards boosted sales or has the effect been negligible on this growing market?
The primary impact of the ABI Statement of Best Practice for Critical Illness Cover has been to clarify the intention and wording of the different CI policies but it appears that it may also have helped to promote the sales of new CI products. Nick Kirwan, manager, product development, at Pegasus and chairman of the ABI Critical Illness Working Party, says: "It has improved consumer confidence in the product and anything that makes CI easier to understand will have a positive effect on sales."
Kirwan says: "The ABI set out a number of conventions to make sure providers put down just what is covered and more importantly what is not covered. This forced providers of CI to look at their small print and decide 'do we really need this?'"
This survey shows that while the providers have had to ensure that their products now meet the ABI standards some of them have still retained their own individual elements. John Hay, head of product marketing at Scottish Provident, says: "We have produced separate sales literature to make it clear where our products are better than the ABI definition. Our concern was that we did not want to reduce the quality of our cover to comply with the ABI guidelines."
Providers have started looking towards the development of new products and features such as buyback policies to develop their market share. There are two different types of buyback policy. Life cover buyback means that a year after making a claim for a critical illness it is possible to purchase replacement non-rated life insurance so that in the event of death there is still an insurance policy in place. Critical illness buyback works in a similar fashion in that following a critical illness claim a further CI policy can be taken out to cover against a further illness with no need for further medical evidence.
Kirwan says that some of these new products are good in principle, but they need further development. He says: "Life and CI buybacks are two good concepts but there are flaws in them at the moment and there are currently better solutions in the market."
Another feature which some providers are looking to develop, is tiered benefits. A critical illness policy with tiered benefits will pay out a lump sum that varies according to both the severity of the illness and the illness itself. Geoff Brown, managing director of BUPA Health Assurance, says: "BUPA is currently looking at the possibility of tiered products and I see other providers moving this way in the next 12 months, but the problem is that consumers like the simple idea of the CI."
