Critical illness: Future-proofing definitions key objective for ABI working party
Future-proofing definitions for critical illness (CI) insurance will be one of the major objectives of the Association of British Insurers' (ABI) review of the product in 2005, it has been revealed.
Addressing delegates at the COVER Protection Forum, Nick Kirwan, chairman of the ABI's CI working party, outlined plans to move the product forward.
This follows the release of results from a survey conducted by Legal & General, which suggested that standardisation is key to the future success of CI.
In addition to future-proofing the definitions, Kirwan said other options for sustaining the CI protection market include developing more reviewable premiums and definitions or a new type of health product - perhaps a CI/IP hybrid.
Despite suggestions to introduce a product that dovetails CI and IP, Kirwan announced that trading standards would prevent the creation of a hybrid solution.
He said: "The Competition Act would prevent the Association of British Insurers from developing a hybrid product. It has also stressed that such a product should not be categorised as critical illness cover. The Office of Fair Trading has made it clear that this would mislead consumers."
The review will aim to maintain the CI concept on a longer-term basis as well as try to retain consumer confidence and a healthy and competitive market.
Kirwan added that this is particularly important as the protection product has suffered from bad press over the past two years because of its rapidly increasing rates. This has, in turn, led to fewer guarantees, reduced reinsurance capacity and raised questions about sustainability at a time when a small percentage of the UK population has any protection cover at all.
At the same time, the need for these kind of products seems to be greater than ever, he said, as the £27 billion savings gap indicates that people have not got any extra money to fall back on.
"In the UK we are ramping up the financial risks as well as the health risks and I believe people need financial protection like never before," said Kirwan.
He added that he thinks advisers could play a major part when it comes to encouraging people to opt for further protection. "People need protection but they also need advice about protection," he concluded.
