It is amazing how the world has changed in the 40 years since critical-illness (CI) cover was introduced. We now have mobile phones and the internet, and medical advancements have meant some conditions that were life-threatening are now treatable to the point of having less impact on people’s lives.
As the years have gone by, CI cover has had to adapt to stay relevant. So, we have seen insurers fall over themselves to add more and more conditions to their plans than their competitors – referred to in the industry as ‘the conditions race’.
More recently, the focus has been on tweaking the definitions of conditions in line with medical advancements, with a view to balancing the needs of customers and insurers. But as we move further into a new year, how is CI cover likely to evolve in 2024 and beyond?
Simplification
Industry commentators say product design does not really change in the CI market. This is partly to ensure products are easily comparable on adviser portals, so advisers can meet their due-diligence requirements for compliance purposes. Having said that, if insurers do nothing going forward, the risk is that the market will stagnate.
“Evolving CI in an already saturated and balanced market will undoubtedly be a challenge but a necessary one to avoid stagnation,” says Chris Reed, executive marketing director at Protect Line. “To my mind, the next frontier lies in simplification.”
Despite significant improvements over the years, Reed says CI is still a befuddling concept for many consumers, largely due to the complex and extensive list of illness definitions.
“We’ve seen some attempts at innovation, such as AIG’s simplified “Key3” product. However, because they still cover the largest claimed illnesses, there isn’t a substantial price drop to attract consumers,” he says.
“Don’t get me wrong, CI is an excellent product. It has a strong pay-out record and many families have benefited tremendously from it. However, it’s still a product that needs to be ‘sold’ as consumers aren’t actively seeking it out.”
Justin Harper, protection development director at LifeSearch would like to see further evolution of ‘turn-off-and-on-able’ cover that can adapt quickly and simply to changing customer needs. “On the flip side, insurers need to exert caution when claiming to be making things simpler for advisers because most product development is usually only adding to the existing layers of complexity,” he says.
Flexibility
As every financial adviser knows, every client is different and their circumstances can quickly change, so CI cover needs to reflect that. Commentators see increased flexibility as an area for insurers to work on and point out that some firms are already focusing on this.
“Zurich is giving oodles of choice to advisers in terms of the levels of cover they want, childcare cover and pregnancy cover,” says Protection Guru head of research, Adam Higgs.
But many would like to see more innovation in product design to meet customer demand for greater flexibility in CI cover.
Jonathan Phillips, protection lead at insurance platform provider EIS, says CI cover and income protection (IP) are typically distinct products. “But at claims stage they’re highly interrelated as one often follows the other,” he says. “Add in the fact adviser portals can create ‘cafeteria’ style packages from different providers to manage cost, the claims experience can often be overly complex with different terms and conditions.”
Philips thinks hybrid CI/IP products with the inherent flexibility to solve this feels like a logical evolution. “But traditional policy-centric admin systems are unlikely to cope,” he adds.
Improved service
Advisers are experiencing poor service levels across the board, but commentators believe technology can help insurers improve service levels in the protection market.
“Ageing systems and an inability to recruit and retain staff are often cited as to why insurer service levels appear to be falling, even when new business growth is relatively static,” says Philips. “The reality is technology can help across the entire insurance lifecycle.”
According to Philips, generative AI can help speed up the underwriting and onboarding of CI cover and other protection products. He also believes data-driven technology can help with the claims process.
“Protection providers issue statistics regarding the claims payouts, which is great, but a CI claim comes at a point of distress for the customer,” says Philips. He notes that, at this stage, what matters is how the customer feels about how they are being treated, and how long it takes for the claim to be assessed, approved and paid.
“The right event-based data-driven technology can react to changes in claim status, automatically notify interested parties and make sure the process keeps flowing,” he says. This would improve customer experience while also reducing claims processing times.
For Reed, the big question is who will lead the drive towards innovation. “Will it be the insurers independently, the distributors, or should the Association of British Insurers step in to moderate the conversation?” he says.
“Whichever path we take, the goal should be to make the product simpler to understand. This, in turn, will enable better promotion and ultimately lead to more families being protected.”
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