Think Tank: Industry roundtable debates the future of critical illness cover
An overdraft facility providing lifetime protection cover is the ideal product of the future, according to the latest COVER Think Tank.
Debating the future of critical illness (CI), guests at the roundtable discussion examined the current product offering and outlined the perfect solution for the future.
John Joseph, managing director of John Joseph Financial Services, said development of CI products should focus on providing lifetime cover, allowing clients the option to draw an income or lump sum in the event that they fall critically ill or are unable to work.
"The ideal product of the future will see everyone given a £1m overdraft facility that can be used during their lifetime. It would work by allowing the customer to draw off £x per year as an income protection policy, or if they are very ill, an £x lump sum for an operation and there would also be some left in a pot for retirement. The limits would be set in the same way as conventional underwriting limits, maybe four times salary," he said.
The concept was well received by guests attending the discussion. Sue Wilkinson, head of life and health propositions at Abbey for Intermediaries, said a product providing lifetime cover could help to address the budget issues faced by advisers when selling protection.
"In an ideal world, everyone would have income protection, critical illness, and home and contents insurance. In reality, it comes down to what people can afford and clients often decide to have critical illness instead of income protection (IP) cover. But in the long-term, that may not be the one they will actually need. Without a crystal ball, it is difficult to predict what a client will need," she said.
Despite calls in the market for a hybrid product that dovetails IP and CI, it was agreed that developing a combined solution could prove problematic, both in terms of design and litigation.
"Compliance systems are set up around existing product sets, so there is a danger that any kind of hybrid product that does a bit of one thing and a bit of another but doesn't have the benefits of either, has litigation potential," said Dale Tranter, research manager at Sesame.
nA full copy of the debate is featured in the Think Tank supplement, free with this issue.
