For our industry, this crisis strengthened the case for discussing protection.
Now we are facing a crisis of a different type: the rising cost of living.
The Opinions and Lifestyle survey carried out by the Office for National Statistics says 83 per cent of adults reported an increase in their living costs in March 2022 compared with 62 per cent in November 2021.
The question for us is whether this latest crisis – the level of inflation and its impact on consumer budgets – has started to ‘close the door’ on the appetite for talking about protection.
It is almost certainly going to be dominating advice conversations.
Loss of health has significant potential to devastate family life.Our biggest job right now is to make sure that clients are not distracted from their protection needs.
One way to do this is to remind people of the reality. Cancer is the biggest cause of claim according to the Association of British Insurers.
We know from charity Cancer Research UK that one in two people get cancer during their lifetimes.
Most crucially, they tell us that it is not just elderly people who get it. Adults aged 25-49 contribute around a tenth (9 per cent) of all new cancer cases, and adults aged 50-74 account for more than half (54 per cent).
These statistics show why it is so crucial for advisers to be discussing a broad range of protection products with clients, and particularly critical illness insurance.
Yet the most recent picture of product holding in the UK – the Financial Conduct Authority’s Financial Lives survey – shows just how exposed the population is.
This survey was last run in February 2020, before the pandemic, so while it is a little out of date, it still gives us the best current illustration of consumers’ situations.
At the time, 31 per cent of the UK population had life insurance in place. By contrast, just 14 per cent had a critical illness product.
Obviously we will be looking at the next set of Financial Lives data with interest to see if this has shifted, but based on the latest snapshot we have, this relatively low penetration of critical illness insurance compared with life insurance is worrying.
Loss of health has significant potential to devastate family life.
Evaluating value
Advisers are well positioned to help clients understand the different risks, as well as to appreciate the value of the most appropriate protection cover – not forgetting of course, the value of their advice recommendation.
But what do we mean by value?
Value is personal and can mean different things to different people.
However, when it comes to critical illness cover, value must be linked to the certainty of payout.
The more likely the policy is to pay out, the more confidence clients can have in their adviser’s recommendation.
Based on information from CIExpert, the ‘big four’ most claimed for conditions are cancer, heart attack, stroke and MS.
This means any comparison of value needs to look at the definitions for these.
While it is not easy (or quick) for advisers to do this alone, companies like CIExpert and Protection Guru – with their respective quality comparison software systems – are here to do the job for us.
It is very encouraging to see that sourcing companies like Iress and iPipeline are integrating with these experts to make it easier for advisers to recognise quality and the associated price.
This brings us to their results. Who is providing good value?
Protection Guru ran some analysis on this.
By using extensive incidence data, a panel of independent medical experts gave providers’ critical illness definitions a score of between 0-100 per cent based on how likely it is that a claim will be paid.
Only Guardian scored 100 per cent across the four most claimed for conditions.
That is not all. The beauty of Guardian’s definitions is that you do not need to be a doctor to understand them.
They are written in simple language and leave little room for ambiguity, which means clients are more likely to get what they expect from their cover.
We did an exercise in-house to sense check this.
We compared three competitors in our industry with our own big four critical illness definitions.
The results were quite compelling. Some of the wording in the industry, for just one definition, runs to seven lines long.
For other definitions, it took multiple readings for us to properly digest them.
This does not bode well for the average consumer. As a side-point, I believe language is becoming even more important within the new consumer duty regulation – but that is something for another day.
What is clear from any comparison is that it may be worth paying a bit more for a better definition.
We recently launched a ‘Big 4’ campaign to do what we can to help explain why the definitions are so important when it comes to measuring the value of various critical illness covers.
We hope it helps advisers have more meaningful conversations with their clients, so they better appreciate the true value of their cover.
Clearly articulating this is so important at a time where people are focused on costs; and advisers and providers must work together on this for the good of our clients.
Protection plays such an important role, both for people whose financial circumstances would be negatively impacted by a loss of their health, as well as for families whose financial situation would be impacted by a loss of the policyholder’s life.
So, as we shift our attention from one crisis to another, let us remind ourselves that the need for protection, and the value it brings, remains constant.
Jacqui Gillies is marketing and proposition director at Guardian
