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June 08, 2005 at 08:00 PM
The status of the market in mid-2005 is positive
During the 2004-2005 period, the health care situation in the United States continued to demonstrate the pressing need for critical illness insurance as a consumer choice for paying expenses not covered by high-deductible medical plans.
The rise of consumer-driven health care and of health savings accounts reinforced this, by fostering an environment in which making appropriate health care decisions is increasingly the consumer’s responsibility.
So did the spreading recognition that medical and non-medical expenses related to catastrophic illness ultimately can lead to bankruptcy. (Some people still think they have good health insurance that will cover all their medical costs, of course. However, media reports have been coming out on how many uncovered expenses remain–e.g., hospital and medical deductibles, prescriptions, job loss and maximum-benefit caps–and how these expenses can run into the thousands of dollars, putting families into financial jeopardy.)
These and related trends are favorable to CI insurance, which consumers can use to fill the unmet needs. This has not been lost on larger carriers. For instance, in 2005, MetLife entered the individual and group CI insurance market. That is significant, I believe, because having a carrier of that magnitude in the market adds to the product’s visibility and credibility.
So, the status of the CI insurance market in mid-2005 is positive: The coverage has achieved legitimacy. Here are some details:
Company Overview. Table 1 shows there has been modest growth in the number of companies entering the CI market, compared to 2004. However, our research indicates that several carriers, ranging from individual to group, are considering including CI insurance in their product portfolios in the near future.
Although only 9 companies are currently in the employee benefits channel, this channel could prove to be the catalyst for widespread consumer awareness about CI insurance. This is because companies are committing major resources to addressing employee benefits, either through guaranteed issue or voluntary CI insurance programs. Some carriers are focusing on the mid-size, while others are targeting the large and even jumbo employers. This is due to the interest these markets have expressed in CI–especially in how CI can complement high-deductible health care plans.
Table 2 shows that stand-alone CI insurance products are currently the predominant product design. These designs are appropriate for products offered in both the employee benefits channel as well as for the worksite and for individuals.
An offshoot of the stand-alone product is the CI rider. Some insurers are offering this rider on a group disability chassis.
The accelerated product is usually CI coverage built onto a life insurance chassis. Should the client purchase a $100,000 life policy with CI rider and then be diagnosed with a critical illness, the life policy will pay $100,000 in CI benefits. If there is no such diagnosis during a policyholder’s lifetime, the $100,000 is payable on death.
Features. Some predominant features in current product designs are:
First occurrence: A lump-sum payment upon the first diagnosis of a covered condition.
Recurrence: If the insured receives benefits for a covered CI condition but subsequently has a recurrence, the CI benefits will be paid again.
Additional occurrence: An additional benefit for a covered CI condition for which benefits have not been paid previously.
Spouse and child coverage: An available option, particularly in the group and worksite channels, in recognition of the fact that individual workers are as concerned about their families as about themselves.
