Critical illness insurance proponents claim CI is an easy sale because it is simple, it is appropriate for a wide range of markets, and people should embrace the concept because of their concern over contracting a major illness.
If that is so, why have CI sales in the United States been slow and not expanding as quickly as some have predicted? Two new reports from LIMRA International suggest the U.S. may not quite be ready for a CI sales explosion.
The readiness of U.S. consumers to purchase CI insurance may be a function of the current economic and social environment. In comparison to conditions in the United Kingdom and Canada, nothing is happening here to drive consumers to the product.
In the U.K., CI insurance sales soared in the 1990s. Their success was a result of cutbacks in government programs that had formerly provided mortgage assistance to consumers. In order to qualify, consumers now have to be unemployed for longer periods of time and they also now receive lower subsidies. The mortgage-related CI product, which pays out directly to a consumers mortgage holder in the event of critical illness, has met the needs of consumers facing economic uncertainty and given them protection for their most important asset.
Likewise, sales of CI products in Canada have been attributed, in part, to the state of their universal public health care system. Long waits for tests and care have given reason to buy CI products. In fact, some companies specifically promote the ability to take the lump-sum benefit payout and seek treatment and care outside of Canada.
Unlike their Canadian and U.K. counterparts, U.S. consumers have no such compelling reasons to consider buying CI products. Even the tragedy of September 11 will not affect CI sales–because consumers distinguish between getting hurt (as in an attack) and getting sick. They have not yet identified a strong need for the product.
Distribution channels for CI products might also be influencing sales performance. Both Canada and the U.K. rely primarily on the personal agent to sell individual CI insurance. The U.S., on the other hand, has been focusing more on group insurance sales as a preferred channel.
According to a recent LIMRA company practice survey, participation rates for some companies selling a group CI product are typically under 30%. Companies have also reported that low producer awareness and low expertise with CI are some of their greatest challenges in CI marketing (see chart). At the time of the survey, about 30 U.S. companies were identified as selling a CI product.