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.
Consumers: From a consumer standpoint, the barrier is lack of knowledge about the product and the needs that it can solve.
Simply put, the consumers–and even the benefits managers–aren’t asking for a CI product because many don’t know that one exists. They are uneducated about the product, and when asked about CI coverage, they often see other product types (long term disability, long term care and intensive care benefits) as the “same” type of coverage.
Yet, when the traditional CI plan is explained to consumers and benefit managers–including how the product can be used to solve the financial problems caused by surviving a critical illness–they like the concept. Understandably, much more consumer education is needed.
Carriers: Finally, insurance carriers also are hindering CI sales.
In a recent survey we conducted, insurance carriers often expressed the desire to replace cancer products with CI products primarily because of the better predictability of claims. Carriers also believe CI insurance is probably a better product for the consumer since it covers more than one condition.
But carriers who already are offering cancer products don’t feel they can eliminate their cancer plans because their broker/producers often aren’t willing to sell CI instead of cancer. In fact, several companies that tried to eliminate their traditional cancer products encountered serious field objections.
In addition, carriers often don’t want to cannibalize their cancer block (or encourage their brokers to do so).
So, what will it take for CI sales to exceed or even replace cancer? We believe it is up to the carriers.
CI insurance is probably a better product for most consumers, so carriers need to lead the charge and push in that direction. This means thinking beyond tomorrow’s sale (of cancer insurance) and aggressively attacking the problems of uneducated brokers and consumers.
More training is needed for producers–training that goes beyond the product features and benefits or underwriting guidelines. Producers need to understand the needs addressed by CI insurance, where the product fits in with an employer or employee’s benefit program, and, for some, why CI insurance is a viable and inevitable alternative to cancer insurance.
Carriers also need to provide producers with the marketing support they need to educate benefit managers and employees on the product. Despite the early promotional activities of a few carriers, most benefit managers and employees still aren’t aware of CI coverage and the role it can play in ensuring a family’s financial security.
In summary, CI insurance will not replace cancer until: 1) cancer carriers replace cancer with CI insurance in their portfolios, and 2) the voluntary and worksite carriers that don’t offer cancer accept the value of adding CI insurance to their portfolios.
Once the old cancer insurers have noteworthy success with CI insurance, other carriers, including the “non-cancer” companies, will join the party.
Gil Lowerre is president of Eastbridge Consulting Group, Inc., a worksite marketing and voluntary benefits consulting firm, Avon, Conn. Bonnie Brazzell is vice president at Eastbridge, in the Columbia, S.C., office. Their e-mail addresses are, respectively, firstname.lastname@example.org and email@example.com. The data shown here is based on their research with employers, employees and producers.
CI insurance is probably better for most consumers than cancer insurance, so carriers need to lead the charge and push in that direction