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April 23, 2006 at 04:00 PM
Critical illness insurance remains under a cloud, ignored by most carriers. This is despite a silver lining.
The silver lining is that there is a small corps of dedicated CI insurance companies, and all companies in that group reported that their 2005 CI sales were up.
CI insurance pays benefits to insureds who are diagnosed with a specified critical illness, such as stroke, heart attack and cancer. As shown in Chart 1, the product is now available in four chief product designs. Chart 2 shows the most common benefit triggers. What of marketing? All forms of individual and group marketing exist in this market, but worksite marketing apparently has become very prominent.
In the marketplace, the product’s branding has suffered from a noticeable tendency to confuse modern CI insurance with its forerunner–the one-cause product (usually cancer insurance) that arose in the 1960s.
As is evident in Chart 2, the modern CI product is entirely different, because it seeks to address multiple causes of critical illness. Not all policies cover all the triggers shown, but many of today’s CI policies cover at least five or more different diagnoses.
As you may recall, the modern CI product arose in the United States in the 1990s as an accelerated death benefit vehicle for life insurance. Some companies adopted it in the meaningful-to-the-public form described in Chart 2. This was done by rider; it therefore constituted a substantial extra rider sale for agents.
However, a blow to the product was delivered when most companies later adopted the “terminal illness accelerated death benefit” to address the critical illness exposure. This was a blow, because the terminal illness reference was vague, subject to decisions by doctors and could be included in products “at no additional charge.” (That last one–the no extra charge–had curbside appeal because it was a value-added feature. However, for the insurer and agent, it produced no additional revenue.)
Gradually, the lump-sum stand-alone product emerged, and it seems now to be prominent. In the process, it became a “health insurance” product.
