CI market is ready for new products

Advisers are calling for change in the protection arena, according to recent research from financial services forum PIMS. In its annual survey of the IFA market it found that 79% of protection IFAs believe the critical illness (CI) market is ready for the next generation of products.

Discussing the research, Mitch Hopkinson, director at advisory firm M2 Financial, agreed that the market needed to develop to become more attractive to consumers.

"The market is crying out for a product that bridges the gap between critical illness and income protection. Perhaps something that pays out a combination of a lump sum or instalments, or a slimmed down version of critical illness offering basic levels of benefit, which would make it more affordable," he said.

Despite the high volume of advisers in support of product development in CI, Kevin Carr, technical adviser at LifeSearch, disagreed with the demand for the next generation of products.

The concern, he said, is that the abolition of guaranteed rates and the introduction of a new style of product would lower the take-up of the product.

"It makes no sense to change anything at this stage. Last year was a record year in terms of sales and consumers like the guaranteed option. Would it really be a good idea to take away something that protects many people in this country?" said Carr.

While guaranteed CI products remain in the market, many advisers believe that fluctuating premiums are likely to continue. A total of 80% of respondents did not believe that guaranteed rates will remain at the same level throughout 2004.

The income protection (IP) market also came under scrutiny by the survey. A total of 57% of respondents said they expected no increase in the sale of IP products during the next 12 months. Carr agreed that as long as guaranteed CI products remain in the market, the likelihood of the IP sector growing substantially remains slim.

For 60% of respondents, the protection market provides an ongoing link with life offices as the majority claimed that protection business was the only reason for their continued dealing with them.

"Contact with life offices is very much limited to protection sales. It is difficult to get good support and getting things through the underwriting process swiftly can be a challenge," said Hopkinson.