Blog: Give us a clue on critical illness!

Head of marketing at Ageas Protect, Andy Milburn, wonders where on earth the market will take critical illness next...

Stuck or confused? Feeling a bit silly, embarrassed or just unsure what to do next? Well, these are all symptoms of being outside your comfort zone. I have learnt from previous roles that insurers in other countries such as Japan spend much more time outside of their comfort zone than we do so when we get there it feels weird, and a bit scary. But the truth is it shouldn’t.

Just one simple question got me into this state: What should we do next with critical illness (CI) cover?

You see, a decade ago the answer was fairly easy. We would think about adding conditions. Every three years, we would get the ABI statement of best practice, which introduced things like future-proofing and improved standard definition wordings. These things were not too tough to implement and promote. In those days, marketing teams responsible for critical illness products were in a pretty comfortable place.

Things have changed. Severity-based cover arrived from South Africa. Providers started reacting to it by adding an ever-increasing number of new conditions to the more traditional CI products available through intermediaries.

The ABI chose to push a replacement for total & permanent disability in their last tri-ennial review. That didn’t really end up anywhere.

Meanwhile, providers continued to add new conditions. Some commentators liked that idea, some didn’t. Funnily enough, those that didn’t like adding new conditions have now begrudgingly started to do so. Is this a case of ‘if you can’t beat them join them’?

Condition creep is even happening to CI products in South Africa now. That was the home of the product, which started out as a simple dread disease plan.

Sitting here at my desk, I am wondering what happens next. Where do those responsible for the product in the UK take its design in 2012 and beyond?

I see a few clear strategies emerging. The first strategy is to continue with condition creep and expand the number of conditions bit by bit. But doesn’t this slowly evolve the traditional product design into a severity-based product? Some of the additional conditions we are adding must come at a price to the customer if they mean something and a meaningful sum assured is required by the customer too.

The second strategy is to go the whole hog, wave the white flag on the traditional product design and follow the South African market by creating more severity-based/complex products. A number of providers in South Africa have now gone down that route. But is this a form of PMI? Does anyone remember major medical expenses?

There may be other roads for providers to take. Some may choose to simplify things and offer the original core conditions on their products, while others may adopt a theme for how they take their product forward. Alan Lakey makes some good points on conditions, stating there must be prevalence and incidence. Is that a starting point?

One other thought: where is the customer in all of this? Many experts say both income protection and CI cover are flawed in certain areas. Could we perhaps look at both together to deliver what the customer expects of each? Is there a potential new product or combination of both to be discussed that meets customers needs without the issues both products carry today?

Being responsible for the design of a CI product is a very confusing place to be right now. What would you do? Give us a clue!

Follow Andy Milburn on Twitter: @andrewgmilburn