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Trying To Connect Boomers With Critical Illness Insurance

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Could critical illness insurance be as useful to baby boomer executives and professionals as it is to the blue-collar workers on the shop floor?

Advisors who sell the product say it can be useful to moderately affluent and even affluent boomers as well as to moderate-income boomers.

“This is not health insurance,” says Alphonso Franco, CEO of the Critical Illness Centre, Victoria, B.C. “It’s financial insurance. If you live long enough, you get one of these illnesses no matter what.”

Other advisors are skeptical and say most clients should stick to products such as group health insurance, disability insurance and long term care insurance.

Franco, who organizes an annual critical illness conference series, says only about 35 of the 1,000 participants at a typical conference come from the United States. The rest are from Canada or other countries.

Although at least 32 carriers claim to sell CI insurance in the U.S., today, fewer than a dozen seem to be actively in the market, Franco says. He believes U.S. interest in critical illness insurance is soft because, with some exceptions, the U.S. products tend to be more conservatively designed than the products sold in countries such as Japan and the United Kingdom.

One major difference is the coverage termination age, which tends to be 70 or less in the United States but may occasionally run as high as 100 in Canada, Franco says.

Once U.S. insurers make the kinds of CI insurance products sold in the rest of the world available in the U.S., “it will be the biggest selling product in the United States,” Franco predicts.

Critical illness insurance is a younger cousin of cancer insurance.

The typical cancer insurance policy pays a set indemnity benefit when the insured is diagnosed with most forms of cancer.

Dr. Marius Barnard, the brother of the famed South African heart surgeon Dr. Christiaan Barnard, invented the critical illness insurance market in 1983, in response to concerns about the financial difficulties that many heart transplant recipients faced.

The typical critical illness insurance policy pays a similar kind of flat cash benefit when the insured is diagnosed as having suffered a serious form of cancer or one of several other dread conditions, such as heart attack, stroke, multiple sclerosis or the need for a major organ transplant.

ING Employee Benefits, Atlanta, a unit of ING Groep N.V., Amsterdam, is an example of a large carrier that has entered the voluntary CI insurance market.

When insurance advisors are deciding whether voluntary critical illness coverage is suitable for affluent boomer clients, “they’ve got to look at the needs of each individual separately,” says Curt Olson, president of ING Employee Benefits. “But I think it’s getting to be more interesting to boomers. It’s covering conditions that they’re starting to worry about facing.”

In the worksite market, typical face amounts range from $5,000 to $100,000, with an average face amount of about $20,000, according to a presentation that Fred Rodenbach of UnumProvident Corp., Chattanooga, Tenn., made in February at the Benefits Marketing Renaissance, a conference organized by the Benefits Marketing Association, Twinsburg, Ohio.

Some carriers offer small amounts of guaranteed issue coverage, but simplified issue underwriting is more common, according to Rodenbach.

Franco says boomers in the U.S. individual market once could get $2 million in coverage. Now, the typical maximum is $1 million, and agents may have to justify the need for that much coverage, he says.

Insurers have been making serious efforts to sell critical illness insurance in the U.S. for only a few years, Franco says.

In the U.S., the product still suffers from attacks that consumer advocates made against cancer insurance back in the 1970s.

Years ago, consumer advocates scoffed at the idea of buying a product that would protect the purchaser against one serious illness, or several. The consumer advocates argued that consumers should buy good health, life and disability insurance, then use personal savings to protect themselves against the risk of serious illness.

But critical illness insurance experts note that times have changed since the 1970s, when affluent breadwinners were usually men, and wives and grown children were available to act as nurses.

Even under the best of conditions, “everything increases when you have an illness,” says Joan Rhodes, president of Employee Benefits Specialists Inc., Pleasanton, Calif., who owns a CI policy.

Annual charges for deductibles, co-payments, coinsurance payments and accidental use of out-of-network care could easily exceed $10,000 for a boomer with a serious illness.

Harried “sandwich generation” boomers from dual-income homes may have to make heavy use of private nurses for the sick spouse, babysitters for young children and home health aides for frail parents to cope with a major illness, experts say.

In a perfect world, affluent boomers should have plentiful savings, but, in this world, many high-income boomers spend more than they earn, Franco says.

Critical illness insurance has a blue-collar reputation in the United States because worksite marketers have been trying to present it using the same strategies they have used to sell cancer insurance.

In 2003, sales of cancer insurance and CI insurance accounted for about 13% of new U.S. worksite sales, or about $500 million in sales revenue, according to Eastbridge Consulting Group Inc., Avon, Conn.

The Society for Human Resource Management, Alexandria, Va., found when it surveyed members in 2002 that 32% of the companies that responded offered some kind of critical illness insurance benefits.

About half of the companies that offer critical illness programs pick up at least some of the tab, according to a 2004 survey sponsored by MetLife Inc., New York.

Critical illness insurance can be valuable to workers of all ages, but it can be especially important to boomers, because boomers are getting older and more vulnerable to serious illnesses, Franco says.

One example is stroke. Between 1988 and 1994, about 2% of men ages 45 to 54 suffered a stroke in a given year. The incidence of stroke doubled to about 4% for men ages 55 to 64, according to the May 2004 National Heart, Lung and Blood Institute chart book.

The incidence of heart attack increases to more than 10% for men ages 55 to 64, from about 5% for men ages 45 to 54, according to the NHLBI.

Rhodes, who bought CI coverage for herself, says she finds the typical buyers in the worksite market are white-collar workers, who have an easier time paying for the coverage, which can run about $35 to $70 per month.

Insurance advisors say selling critical illness insurance in the individual market seems to be more difficult.

William Upson, president of the Strategic Asset Management Group, Walnut Creek, Calif., is one example of an insurance advisor who has had a hard time getting affluent boomers to take much interest in critical illness insurance. “People do not seem to respond favorably to it.”

Clients are more interested in long term care insurance, and working clients who like the idea of critical illness coverage hate the idea that coverage might terminate at age 65 or 70, Upson says.

“People in their 60s or 70s are still working,” Upson says. “Why would I want something that will terminate before I stop working?”

Critical illness underwriting is another challenge, Rhodes says.

Franco says CI insurance underwriting tends to be less exacting than underwriting for individual disability insurance but tighter than underwriting for life insurance.

But, in the worksite market, CI underwriting is considerably tougher than cancer insurance underwriting, Rhodes says.

Any boomer who has been free of cancer for 10 years can qualify for cancer insurance, but boomers who have family history problems, such as two parents who died of strokes before age 60, may have trouble buying critical illness insurance, she says.

Rhodes says she is hoping the underwriting barrier is a temporary problem.

Many U.S. carriers now have been in the CI insurance market for three years, and that’s about how long carriers need to understand the underwriting issues in a new market, Rhodes says. The carriers “want to see what their claims experience is,” she adds.

‘This is not health insurance,’ says one advocate. ‘It’s financial insurance.’

Incidence Of Stroke Among Men, By Age


% Of Population











75 and over


Source: American Heart Association 2005 Heart Disease And Stroke Statistics


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