By Daniel Pisetsky
The critical illness insurance marketplace continues to grow. This review details how and also looks toward new growth areas.
Table 1 represents a consolidated overview of the CI marketplace by distribution channel. As can be seen, growth in the worksite and individual arenas is continuing in 2004, but growth in the employee benefit arena is slower.
What do these channels have in common? Each continues to use the 3 core CI product designsstand-alone, acceleration and rider. (See Table 2 for a consolidated market overview by product type.) These policies can be sold as non-contributory or contributory or directly purchased by an individual.
o A stand-alone CI insurance product is built on a health insurance chassis. Usually, these products are guaranteed renewable and can offer benefits ranging from $25,000 to more than $1 million.
o 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 critical illness diagnosis during a policyholder’s lifetime, the $100,000 is payable on death.
o Some products embed a supplemental CI rider on a life, disability chassis, or health 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.
Core product designs are changing significantly. The original CI concept was that a lump sum would be paid upon first diagnosis of a CI condition. Life-threatening cancer, heart and stroke account for approximately 75% to 80% of the CI conditions diagnosed. A policyholder diagnosed with any of the 3 core CI conditions would receive a lump-sum payment upon first diagnosis.
But U.S. product designs are changing the original concept of first-diagnosis lump sum to a more broad-based product. For example, many CI products now on the market offer some of the following benefit options.
On first occurrence: Lump-sum payment upon first diagnosis of a covered CI condition.
On re-occurrence: If the insured receives benefits for a covered CI condition and subsequently has a re-occurrence of that condition, benefits will be paid again. Subsequent diagnosis must occur after a specified timeframe from first diagnosis, and with cancer, the insured must be treatment-free for a specified timeframe.
Additional occurrence: An additional benefit for a covered CI condition for which benefits have not been previously paid and separated by a specified timeframe. Some products are offering a wellness benefit rider, which pays a specific amount per calendar year for screening tests, as well as spousal and dependent child coverage. In addition, other riders are included or available such as monthly recovery benefit, hospital confinement benefit, transportation benefit, lodging benefit, as well as individual, single parent family, or family coverage plan selections.
Some CI policies are offered with or without cancer coverage, to ensure that a person only can receive benefits for an illness under a policy or rider once.
With some CI products, the consumer has a choice of plans. For example, a plan could be purchased with or without the first occurrence benefit. There are pre-packaged benefits, which are divided into category/groups. Within each category/group, there are specified CI conditions. For example, if an insured has a heart attack (group I100% benefit) and subsequently has a major organ transplant (group II100% benefit), the insured is covered for both conditions and will receive 100% of the benefit for each. However, if an insured has a heart attack (group I100% benefit) and subsequently has a stroke (group I100% benefit), the insured is covered only for heart attack at 100% (benefit is exhausted); therefore, there will be no additional group I payout.