Clear and simple

Over the past 10 years we have seen critical illness sales decline. Even a constant reduction in price has not persuaded more people to buy.

So why is this? Is it time the product was radically overhauled or do providers and advisers just need to do a better job of engaging consumers? Research statistics have been somewhat conflicting with some reports saying that consumers have a high awareness of the need to protect themselves but still do not buy and others saying that awareness of the product is very low. Whatever the reasons are, the bottom line is that critical illness cover no longer has such a defined presence. Action needs to be taken to get the product back on track and ensure it is appealing not just to consumers but also to advisers selling it.

While the current economic climate will undoubtedly have had an effect on a decline in sales, the complexity of the product may not have helped. When critical illness cover first came onto the market over 25 years ago policies paid out relatively small amounts on diagnosis of about five illnesses. Now the list of illnesses is growing with more and more rare conditions being added. This certainly gives advisers more to talk about, but is it an impetus to sell? Or perhaps the addition of all these extra illnesses only serves to make the product more detailed. The longer the list means there is more for advisers to explain and more for their client to understand. But adding even more illness conditions is a way for providers to differentiate between their products and in a competitive environment no business wants to be left behind in the “illness race”. Ironically, despite all the extra illnesses the majority of claims are still for cancer, heart attack and stroke.

Is the product too expensive? Advisers will give clients very good reasons why they should take out critical illness cover. But when belts are being tightened, faced with a choice between taking out life cover for £10 a month or critical illness cover for £50, clients will opt for the cheaper premium.

There are alternatives of course, such as suggesting a client takes out family income benefit to keep costs down or reducing the sum assured. But not enough advisers are doing this to be making a real difference to the overall market. Perhaps what is now needed is to re-establish a niche for critical illness cover, maybe by focusing on smaller amounts of more affordable cover that is primarily used to back up medical treatment.

In general it is believed that many people do not buy protection because they do not understand it or do not believe a critical illness will happen to them. So, providers need to work with advisers to help raise the profile, knowledge and value of protection. Initiatives such as clear and simple literature should help clients see why they should want to invest in protection insurance.