San Juan, Puerto Rico
When many insurance people talk about critical illness insurance, they say that it’s not selling and that it’s too complicated, risky and expensive, according to Jean-Marc Fix.
But Fix, who is assistant vice president, research and development, at Optimum Re, countered each of these arguments in a presentation here at the annual meeting of the National Alliance of Life Companies.
It’s true that CI insurance is still “a tiny part of the U.S. market,” said Fix, who then added that “success is relative and it is big enough for most companies.”
The product has been wildly successful in Japan, the U.K. and Australia, he said, and in the U.S. it has “a big potential market consisting of women, blue-collar workers, singles and worksite sales.”
Is it too complex? According to Fix, the basic concept is simple and appealing: the product pays if the insured gets one of the listed diseases. Nonetheless, there is a need to price, market and underwrite the product correctly, he said, adding that this certainly can be done because “we are in a technical business.”
The key here, he said, is to train the field for the product. “The field needs to know what’s covered, how to explain it and to say how much is paid.”
Insurers need to “provide well-designed tools” for the field and train on “understanding covered conditions.”
According to Fix, “most agents selling this product are life agents who need to understand the difference between a life product and one that pays a living benefit.”
Fix said it is important for insurers to tailor price and benefits to the market being sold. This can be done in a number of ways, he explained, such as adjusting the covered diseases, the payout, commissions, marketing materials and the payment method.
Regarding the product’s pricing, Fix said insurers first had to find a disease’s incidence rate among the general population and then adjust those rates for the insured population. Pricing should reflect these rates, he added.
When the product is filed with state insurance departments, he said, there could be some confusion because “claims are triggered by health conditions, but the product is designed and sold like a life product.”