What women want

critical illness contractS have been among the most successful products in the UK market in recent years. The principal reason for their growing popularity has been their inclusion as part of the protection benefits package sold in conjunction with mortgages.

In the past, companies extended the range of critical illness (CI) conditions offered to compete for market share. From the consumer viewpoint, it is debatable if this has added value. Few companies have tried to design innovative CI products as a way of boosting sales.

Foreign markets offer ideas for extending the standard CI product design. A good model to look at is the female-only CI policy which has been highly successful in the Asian market.

MLC Hong Kong launched the earliest female CI contract in 1995. Three years later, AXA China Region received the award for Innovative Product of the Year for its Smart Lady insurance plan.

The fear factor

The women that purchase such plans wish to protect themselves financially against common female diseases or conditions such as complications during pregnancy. The conditions covered are not necessarily life-threatening ' which may be a positive marketing feature ' but may cause financial strain because they result in absence from work or demand expensive medical treatment.

A further positive selling point is the free or subsidised medical check-ups that are often packaged into the product. This is a strong marketing message for promoting the concept of prevention rather than cure enabling policyholders to benefit from the policy without the need to incur a severe critical illness.

Drawing on Asian culture, AXA's Smart Lady also provides money for an insured's newborn baby. The importance attached to a child's education is evident by payment of benefits for particular milestones in their education. Furthermore, some Asian markets extend other cash payments to cover events such as marriage.

There is a particular need for this type of insurance in some countries in Asia due to the lack of a funded national health system. Furthermore, women taking days off due to sickness or pregnancy in the UK would be entitled to statutory sick or maternity pay which might not be available in Asia.

So why is there a need for female-only CI cover? The standard CI product covers conditions that affect both men and women. However, it does not cater for needs that are gender specific. Male policies have been marketed in Asia, but they are much less successful than the female version. Asian women perceive a real need for a type of contract that gives them greater financial protection.

The conditions covered by a typical female CI policy may cause great emotional stress and the benefits payable will help to alleviate the situation. A typical policy will provide benefits for female diseases, pregnancy complications and congenital abnormalities for the insured's child.

The most well-known and common female disease covered in Asian products is carcinoma-in-situ (CIS) of the cervix and breast. However, this particular type or any non-invasive cancer in the UK is specifically excluded in the minimum standard Association of British Insurers (ABI) cancer definition. Governments in both Asia and the UK encourage regular screening for these early cancers and this has ensured the public is highly aware of these potentially fatal illnesses.

Local influence of the Asian market has seen the inclusion of certain forms of systemic lupus erythematosus (SLE), which mainly affects women. This disease typically limits itself to the skin but can progress to the internal organs and can be fatal if untreated. The disease is more common in Asia than the UK and 90% of those affected are women, almost all of childbearing age.

Pregnancy benefits

Complications of pregnancy are quite common and include ectopic preg- nancy, death of a foetus/newborn child, disseminated intravascular coagulation, severe pre-eclampsia and choriocarcinoma. They can cause stress and financial strain resulting from expensive medical treatment or lost days off work.

After the birth of a child the product may still pay out in the event of congenital abnormalities such as Down's Syndrome, spina bifida, cleft palate, the heart condition tetralogy of Fallot and a host of other congenital heart problems.

Several Asian products also cover surgical procedures such as plastic surgery and skin transplantation following an accident, or a mastectomy necessitated by breast cancer. Some companies extend their contracts beyond the age of 45 and include such conditions as osteoporotic fractures and hysterectomy.

A league of their own

Female products in the UK tend to be of more limited scope and are usually cancer plans. All the major cancers are covered that affect females: breast, ovaries, fallopian tubes, uterus, cervix and vagina. However, the minimum standard ABI definition excludes cancer in situ.

These plans also tend to have complex benefit payment methods where a lump sum is paid initially followed by a series of monthly payments. A further cash sum may be paid following a surgical procedure to remove the cancer and a hospital cash benefit for each day in hospital. The total benefit paid out is subject to an overall maximum amount.

In contrast, the standard Asian female product covers much more than just female cancers. The UK plans are more of a subset of existing unisex CI policies, rather than an extension from the standard policy.

Underwriting female CI products compared with the standard product requires specialist underwriting based on the conditions covered. The conditions covered in the Asian CI plan are very different from anything that might be covered by other existing insurance products. It is important care is taken to identify all the relevant risk factors.

The unique conditions covered by this product mean that questions on the application form should be targeted in order to avoid anti-selection. For example, CIS will require explicitly adding mammograms and PAP smears to the diagnostic tests listed in the health declaration.

Other areas that need to be covered include any family history of congenital disorders and if complications have previously occurred during pregnancy. Both may significantly increase the probability of a claim being made. For example, with a history of one prior ectopic pregnancy the recurrence rate ranges from 15% to 20%; two previous ectopic pregnancies increase the risk of recurrence to 32%.

In Asia, the female policy is typically more expensive than the standard unisex policy because the conditions covered are more common. The cost of the medical check-up also needs to be taken into consideration.

However, the products in the UK that only cover cancer and use the ABI definition may be much cheaper. Effectively it is a subset of the existing unisex product. This may mean that direct marketing of the product may be a more suitable distribution method because of the lower premium. IFAs will tend to suggest the unisex CI policy, which covers a larger range of conditions.

The female CI policy in Asia is not seen as an alternative to full critical illness, rather it expands the policyholder's level of protection because the conditions covered are different. In Asia, agents 'up selling' to existing clients generated a lot of early sales.

There is some potential for selling this type of policy in the UK market. But there are important differences between the two markets, which may limit the marketing appeal. First, the big selling factor of free or subsidised check-ups is not as relevant to the UK market, which has a free at-point-of-need NHS.

Covering the more common female diseases such as CIS with a limited benefit may be a positive selling point to the UK female market. This will encourage early detection of a serious disease and will give a financial benefit to cover the emotional stress of going through various treatments. However, NHS treatment for this type of cancer is well funded and there is little benefit to be derived from using private treatment.

A full benefit for particular congenital abnormalities in newborn babies could be a really useful benefit. Mothers of babies affected by such conditions may have to give up work or incur the costs of special treatment. The benefit would therefore address the financial needs of the mother.

Can the success of gender-related products in Asia be repeated in the UK? Overall it is worth considering the Asian version of the gender CI plan. However, Asian style design may need some modifications to broaden its marketing appeal to the British female target market.

Scott Reid is product researcher at GeneralCologne Re