US insurers are turning to their UK counterparts for assistance and guidance in developing the criti...
US insurers are turning to their UK counterparts for assistance and guidance in developing the critical illness market in North America.
Still in its infancy in the US, critical illness has only been available since the latter half of the 1990s and in 1999 premium income reached just $100m.
Commenting on the outcome of a two-day conference on critical illness in Georgia, Roger Edwards, sales and marketing director at Scottish Provident and conference speaker, said: "The future of the US market is in the history of the UK market."
US insurers attending the conference were looking for new ways to write business, particularly on the back of rapidly declining term sales, according to Edwards.
"Life assurance sales in the US have fallen consistently through the 1990s. In 1990 there were 14 million sales compared with 11 million in 1999," he said.
But US brokers have been unconvinced by the need for critical illness. This has largely been the result of a lack of effective promotion on the part of the insurance companies, said Edwards.
"Insurers have come out with products but they have not invested time in training and educating agents, salesforces and the public. Insurers need to focus on education, otherwise the product will not take off," he said.
US insurers were particularly interested in the standardised definitions now used in the UK as it could address one of the key obstacles to selling the product.
"To sell a product in the US, it needs to be individually certified by each state it will be sold in and each authority is subject to its own nuances."
Minnesota, for example, insists on unisex rates for all insurance products while Georgia will not allow critical illness insurance to be sold at all. Also, as the concept is new and with each product looking different, state insurance departments are sceptical.
Edwards said: "If definitions were standardised then insurance departments may be much more comfortable certifying them."
Over the last year a number of companies, including Mutual of Omaha and Canada Life USA, have launched successful CI policies. Part of their success has stemmed from pitching the product at lower income groups, said Edwards.
"Our perception of the US is that because they have no NHS most are adequately insured. But there are over 50 million Americans who do not have medical insurance because they cannot afford it," he said.
"Critical illness is therefore a cheap alternative to PMI. While policyholders in the UK put benefits towards the mortgage or holidays in the US it can be used to pay medical bills."
