CI Insurance Update: The Market Is Poised For Growth
By Daniel R. Pisetsky
The U.S. critical illness insurance market continues to evolve with the introduction of new products and new players.
Chart 1 provides a market summary by U.S. distribution channels in May 2003. It shows there are several more players than in our last study, in March 2002 (see chart 2). As for the three core CI distribution channels, chart 3 shows how they break out.
What do the distribution channels have in common? How do they differ? Lets examine each a little closer.
Currently, in the individual distribution channel, there are three different product designs: stand-alone, accelerated and additional rider.
A stand-alone CI insurance product is built on a term-like chassis. These products usually are guaranteed renewable and can offer benefits ranging from $25,000 to more than $1 million.
The accelerated product is usually a CI product built onto a life insurance chassis. Should you purchase a $100,000 life policy with a CI rider and then be diagnosed with a critical illness, the life policy will pay you $100,000. If there is no diagnosis of a critical illness during a policyholders lifetime, the $100,000 is payable on death.
Some products embed a supplemental CI rider on a life or disability chassis. In the case of a CI life product, the supplemental rider would pay a CI benefit upon diagnosis, as well as a 100% death benefit. We are seeing products that are being built on a term life as well as a universal life insurance chassis.
Agents who are selling CI insurance are usually life and health producers. Within the individual distribution channel, disability income agents are using CI insurance as additional coverage for their high-end DI customers.
In the worksite distribution channel, there are three basic product designs. These are stand-alone, accelerated and supplemental. The products are built on either a group or individual chassis.
Agents dedicated to the worksite channel are usually specialists. They may work with third-party administrators that will provide enrollment organizations, either through onsite enrollers or automated enrollment through an intranet or Internet approach.
In the employee benefits distribution channel, CI insurance is in its infancy. Only a few carriers provide a product for group disability and group life. There are three designs: stand-alone, accelerated or a supplemental rider for an accelerated product for group life, or a rider added to group long-term disability.
In the direct marketing channel, insurers are approaching direct marketing with customized products. One such company is marketing a mortgage product designed to pay a stream of income for mortgage payments in the event of a critical illness. Other companies are targeting affinity groups and associations such as physicians and teachers.