When Will CI Reach Its Tipping Point?

A tipping point commonly refers the moment when an idea or product suddenly breaks forth as a tremendous success. This usually happens after years of struggle and obscurity. It often happens because of a specific event.

Most insurance experts agree that critical illness insurance has not yet reached its tipping point in the United States. However, it has reached it in many other parts of the world. For example: nearly 700,000 CI policies were sold in 1998 in the United Kingdom alone, where the in-force book had reached 2.4 million contracts.

No one knows when that moment will come here. So, for now, CI watchers in the U.S. are concentrating on learning more about the coverage, and its possibilities.

For the record, then, CI insurance is insurance that pays lump sums of money in the event of severe (but quite common) illnesses. Chart 1 lists the six core illnesses covered by almost all the contracts here, plus some optional coverages that can be added. The coverage design can be very flexible, ranging from acceleration of life insurance death benefits for CI to stand-alone lump sum payment in event of a critical illness.

As youve no doubt heard, the brother of the famous heart transplant surgeon Dr. Christiaan Barnard first developed the coverage in South Africa in the early 1980s.

The question for NU readers is, does the product have anything going for it that citizens in the U.S. need and want? I think so.

There is the obvious appeal of receiving lump sums, as living benefits. Loss of breadwinning-power, through severe illness, is just as heavy a financial burden for consumers to bear as loss of it through death. And, since medical insurance may not cover many out-of-pocket and indirect expenses associated with major illnesses, chances are most CI patients will face such burdens!

There is another relevant point, not generally understood by field forces and customers: In the important mid-life years, the CI risk is far greater than risk of death! (See Chart 2.) My guess is, this wasn’t the case 100 years ago. Back then, people tended to die immediately, once a critical illness struck. Now, they don’t die; they become disabled. That’s why people need CI coverageto help pay the costs of surviving such an illness.