Critical illness sales survive mortgage decline

Critical illness new business has not suffered as much as expected, despite declining mortgage sales, according to Defaqto.

The market analyst's new Guide to Critical Illness shows mortgage-related critical illness sales fell by 19.5% but total critical illness sales by only 4.7% last year.

Although the two have historically been interlinked, the critical illness sector managed to insulate itself during a weak period for gross mortgage lending which fell from £362,632m in 2007 to £143,506m in 2009.

Ben Heffer, Insight Analyst at Defaqto and author of the guide, says: "Protection policies are ‘sold' not ‘bought' and protection advisers have simply had to work harder for their sales. Advisers have had to increase their sales efforts to counter the difficult conditions caused by the recession and householders' desire to rein in spending.

"As the UK emerges from recession, protection advice remains as important as ever but critical illness is a complicated product and advisers have to work harder to communicate the positives - the long term value and benefits, the improving claims statistics and the new product innovations such as the provision of health and wellbeing services.

"We are also seeing new phenomenon - such as ‘condition inflation' which has resulted in an increasing numbers of critical illnesses being added to policies, over and above those conditions responsible for the vast majority of claims. This does add further complexity but advisers should not overlook that the policy with the greatest number of conditions may not really represent the best value for their client."

Defaqto's first critical illness guide explores the real value that each individual critical condition adds to a critical illness policy. It aims to help IFAs sell on the basis of the quality of the cover rather than the number of critical conditions.

The critical illness guide can be downloaded at: www.Defaqto.com