Scott Cadger runs through the four most common reasons people give for not taking out critical illness cover - and some suggestions on how advisers can offer reassurance on each in conversations with clients
When we look at critical illness cover, the figures do not seem to add up. In the UK, according to MoneySupermarket.com, people are more likely to suffer a serious illness than die before the age of 65 and yet, according to our own protection research, people are four times less likely to take out critical illness cover (8%) than they are to obtain life insurance (34%).
Clearly, there is a gap between perception and reality when it comes to the need for this type of cover so here are the four most common reasons people give for not taking out critical illness cover - and some suggestions as how you can reassure your own clients should they bring them up in conversations with you.
"It's too complicated to understand"
Customers can struggle to understand what they would be covered for with critical illness cover, with 5% of people in our research giving this as their main reason for not taking out this cover type. As an industry, we have historically focused on adding more and more definitions but is that needed? After all, our own claims statistics show 90% of claims relate to just four conditions.
As an industry, it is our responsibility to develop straightforward methods to ensure customers understand the ins and outs of a critical illness policy. At Scottish Widows we aim to provide simple but comprehensive cover, where it matters the most. An example of this is our one additional payment for cancer in situ requiring surgery. With cancer the most common critical illness condition claimed for - and with more than 200 types of cancers -this give breadth and depth to our cancer definitions.
"Insurers probably won't pay out"
Some people still believe insurers will not pay out in the event of a claim and 8% of people give this as the reason why they do not take out critical illness cover. What you can do here is to supply the overwhelming evidence to the contrary.
The Association of British Insurers' own figures show the industry paid out more than £1bn in critical illness claims last year, with 92% of critical illness cover claims paid out. Individual providers also publish their stats - for example, we paid 93% of critical illness claims last year - slightly above the industry average - which equated to paying more than £82m in claims.
We need, however, to make it about more than just the numbers. Customers need to trust we will act on our promise at purchase, to support them when they need it the most. This is where real-life examples can help you bring out the emotional impact of being under-protected. The 7families campaign still has some good case study videos on its website, which you can use with customers.
"I don't need this type of cover"
Medical advances mean we are better at identifying and treating diseases much earlier, but customers do not realise the financial impact serious illness can still have. This is backed up by our own research, with 23% of people saying they did not think they needed critical illness cover.
Conversations around life cover are easier, due to the long-term impact a death can have on a family and their finances. With critical illness cover, you can instead talk to your client about the short term - how much savings do they have versus their immediate outgoings, household bills and other liabilities? How long would your clients be able to cope with a disruption to their finances as a result of illness?
People can struggle to see the benefit of an insurance product they might never claim on. Many critical illness cover policies now provide tangible benefits from day one, through access to financial resilience services. As an example, we give policyholders and their families access to Scottish Widows Care, provided in partnership with RedArc.
This personal nurse adviser service gives practical advice and emotional support when required - and for as long as it is needed. Such services can be invaluable, as the latest report from Macmillan Cancer Support - Am I meant to be okay now? - illustrates, survivors of serious illness can continue to experience health issues long after their treatment ends.
"Cover is too expensive"
Price can be a barrier, with our research showing 33% of people either think or know they cannot afford critical illness cover. There is no denying the cover is more costly than an equivalent life cover amount - but that is because people are more likely to claim for it.
And some cover is often better than none at all. Research by Macmillan Cancer Support, for example, has highlighted four in five people with cancer are, on average, £570 a month worse off as a result of their cancer diagnosis. As such, even £25,000 of cover could help negate the cost impact of cancer for a period of more than three and a half years, allowing your clients to concentrate on what is truly important - getting better.
The cost of £25,000 of critical illness cover for a non-smoking man aged 35 can be less than £10 a month. When you compare this with what people spend monthly on TV packages, insuring pets and cars, it does not seem quite so expensive.
For a relatively small monthly premium, they can secure a level of support against the short to medium-term impact of serious illness. Recommending a menu-based plan that includes even a small amount of critical illness cover can help your customers build better personal financial resilience, by giving them more comprehensive cover.
Help with the conversation
For all the reasons mentioned, having a conversation about critical illness cover can be daunting. On top of this, discussing a customer's health can be a sensitive subject. That is why Scottish Widows offers useful online tools, content and insight that you can use to help make this case. The benefit from doing so is your clients will have a product that will support them and their family in times of illness and uncertainty.
Scott Cadger is head of underwriting and claims strategy at Scottish Widows
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