Before I unpack my argument, let me make my position clear; I have absolutely no problem with people buying critical illness, providing they realise what it covers and they really feel that they need a capital sum should they suffer ill-health. Ideally, if finances permit, it should form part of a protection package with life and income protection.
Preferable
Unfortunately, I often meet advisers who think it is a preferable product on the grounds that it is easier to sell as a product to cover serious ill-health. Easier to sell it may be, but if your client suffers from serious stress or depression or other forms of mental illness or is incapacitated by serious musculoskeletal problems, it will not do them much good because they are not covered by CI plans unless they manage to claim under the total permanent disability definition. The very best of luck there.
This matters because they are the two most common types of claim, so I think a client who wanted cover if struck by ill-health might be more than a little peeved to find themselves unable to claim under the policy you sold them. This was an issue at one stage during the RDR consultation and I think it could become one again soon if disaffected CI policyholders find they cannot claim when they find themselves unable to work.
In fact, both CI and IP are problem children. CI is a product that is continually having to be revamped because the pace of medical developments is rendering policy definitions inadequate. The ABI has done stalwart work in this regard but it will, of course, keep having to do this for ever and a day. It is the insurance equivalent of painting the Forth Bridge because, by the time you have agreed on a change in definition (some of which are necessarily becoming awesomely complicated), science has moved on and presented further challenges to the efficacy of the policy wording.
Revise
I was at a conference a couple of years ago when a very earnest young underwriter was detailing the need to revise wordings because of changes in cancer classifications and improvements in diagnostic techniques in identifying heart problems. His explanation became increasingly detailed and scientific and it made the next presentation on ‘simple’ products a rather ironic postscript. We have to make this product much less complex if we are to offer something that is remotely comprehensible and ultimately useful to our public. I am not sure everyone in the industry appreciates this, but I believe it is blindingly obvious.
Income protection is also problematic because we have made it extremely difficult to underwrite quickly unless you are super-fit, young and in a very safe white-collar occupation.
User-friendly
Perhaps if the industry had invested the same amount of time trying to update and improve the income protection product and process that it has in trying to future-proof CI, we might have developed something a little more user-friendly for client and adviser alike. That has been a concern of mine for a very long time, hence my remarks at the start of this article.
This brings me yet again to the question of the so-called protection hierarchy of needs. I have written more articles about this than Tottenham Hotspur have had managers in the last 15 years. That is how strongly I feel about it. At a time when protection sales are showing strong signs of growth, I think it is a priority for the industry.
Peter Le Beau is co-chairman of the Income Protection Taskforce
