Five or six years ago, article after article was written predicting that the new critical illness insurance products would revolutionize and replace cancer insurance in this country.
After all, the product was an exciting new concept, had done exceptionally well in other countries and it covered cancer as well as other serious diseases. Additionally, critical illness insurance plans didn’t suffer from the same negative image as cancer plans. So, it just made sense that the industry would see a decline in cancer sales replaced by an increase in CI insurance sales. Right?
Not exactly. In the worksite arena (where the majority of CI sales have occurred), cancer and CI sales accounted for about 13% of total worksite sales. This percentage has decreased slightly over the last 5 years (from a high of 16%). Of cancer and CI sales combined, cancer plans make up 78% of the total.
In other words, new business annualized premium for cancer insurance outpaces CI insurance by 3 to 1.
Clearly, CI insurance is not even close to replacing cancer insurance. This article offers an assessment on why this is so and what it will take to reverse the situation.
Our consulting and research has led us to believe there are 3 barriers to cancer products being replaced by CI–producers, consumers and carriers.
Producers: From a producer standpoint, 2 different groups of producers are contributing to the failure of CI coverage (or are serving as a barrier to the product taking off).
First are those who still feel there are certain markets that prefer cancer to CI insurance. Most of these brokers continue to work their block of cancer business and either do not sell CI in those cases or may sell non-cancer CI coverage. In other cases, producers continue to sell cancer insurance because they are used to selling it and still haven’t taken the time to make a transition to CI. In some cases, this is because they don’t believe the “extra coverages” on CI will result in greater sales. Regardless of the situation, the end result is that very little CI gets written and cancer sales dominate for these brokers.
The second group includes those producers who do not currently sell either cancer or CI coverage. The chart below (Prevalence of Cancer/Critical Illness) shows the percentage of worksite and employee benefits producers who do not sell
CI insurance today.
Most of the brokers who don’t sell either cancer or CI insurance did not start out as traditional worksite producers but as employee benefits brokers or property and casualty producers with commercial accounts.
Many are not interested in selling cancer insurance (often because they perceive that it has a negative image with consumers); they might be interested in CI insurance instead but don’t exactly know how to sell CI or believe that their clients would not be interested. The chart below (10 Reasons For Not Selling Critical Illness Insurance) shows the reasons cited by producers we surveyed in 2005.
Often, these producers like the concept of CI coverage, but they aren’t sure where it fits in with an employer’s benefit package or how to position it so that it does not compete with other “core” offerings.
Since these non-worksite specialists sell a significant percentage of the industry’s worksite/voluntary business today, their reluctance to sell CI insurance also holds down sales.
But this reluctance to sell CI may be about to change. According to a 2005 survey we conducted of approximately 100 benefits departments within large commercial p-c agencies, CI insurance was the third most often sold voluntary product.
Nonetheless, more education on CI insurance is needed for the volume of sales to make an impact.