Protection: Looking past the 'conditions race'

Formula One racing fan Graham Harvey, managing director at Axa protection, is less keen on what has been dubbed 'the conditions race'...

I like this time of year. The clocks have gone forward, the evenings are getting lighter and the flowers are starting to bloom.

On the sporting front, F1 is back, and on the weekend when we lost an hour's sleep I struggled out of my bed to watch the Grand Prix in Melbourne and I'm very glad I did.

After the boredom of Bahrain, Melbourne produced a cracking race and a Brit on the podium. Last weekend, we even had a British (and McLaren) one-two!

From one race to another very different type of race altogether:

The industry first coined the term the ‘conditions race' a few years back when providers began adding to the list of illnesses covered by their critical illness (CI) products.

Most providers are now between 33 and 38 but what is the real value in having that many illnesses under one cover?

Providing comprehensive protection for people is one argument. We know that people see protection as a luxury and not a necessity so the longer the list of illnesses the more people feel they're getting for their money.

The devil's advocate in me says that, if it helps people choose to buy protection over not buying any at all, then it's a good thing. I can also see how it helps advisers sell certain products over others.

But if the definitions that are being added to the list are illnesses people are unlikely to suffer from, this could just reinforce the notion that CI is a luxury item.

You can forgive people for thinking: 'Well, I'll probably never suffer from most of these conditions, so maybe it isn't worth buying cover at all'.

Predicting how customers will react towards a product is never easy and the challenge in this case is to educate people about the quality rather than the breadth of a product.

Research from Axa's claims department shows that, in 2008, 55% of claims resulted from cancer, 13% were heart attack, 6% stroke and 5% multiple sclerosis. That is almost 80% of claims from just four conditions.

Underwriters know these are the key areas and I think advisers too should focus on them.

The ABI standardised condition terms a few years ago, but many providers have "gone the extra mile" (sorry, I'm back to motor racing again) to provide what is generally known as 'ABI Plus' covers.

For advisers, understanding every single condition is impossible, but given the claims statistics, ensuring you know the detail in relation to the "big four" and the extent to which different providers have 'ABI Plus' cover is vital to giving good advice to customers.

It makes me wonder whether a product targeted at the "big four" would find favour in the market.

The product would certainly be cheaper but I doubt the price difference would be significant given the claims stats.

Personally, I wouldn't like to see people buying protection purely on the basis of what they can afford over having comprehensive cover.

And anyway, advisers reading this will know far better than me the many ways of convincing customers to give up something else in their lives rather than scrimp on protection cover.