The reasons consumers want critical illness cover have shifted “significantly”, particularly among younger people, research from CIExpert has found.
The CIExpert Critical Thinking Report found more people were becoming concerned about pressure on the NHS and the treatment they might receive from the health service.
While fears of ill-health and cancer were key drivers for the purchase of CI policies, being mentioned by 20 per cent and 18 per cent of respondents respectively, 15 per cent stated they took out CI over concerns about the NHS’s ability to treat them if they became seriously unwell.
This is likely to grow in the coming years, according to CIExpert.
The findings reflect the views of 5,000 consumers analysed by generation, alongside insights from over 300 advisers, making it the “most comprehensive study ever” into the UK critical illness cover market, the comparison business stated.
Mortgages
The survey detected a mismatch between what consumers want CIC for and what the industry is currently selling it for.
While less than one fifth (19 per cent) of consumers said they would use a CIC claim to pay off their mortgage, the report found most adviser discussions about CIC arose from an initial mortgage-related conversation - the main selling point for CIC is often to pay off the mortgage.
This shows "the scale of the challenges that we face as an industry," said CIExpert director Alan Lakey.
“Consumers are changing particularly amongst younger generations who have a far higher proportion of renters and a greater focus on their health.
“As an industry, we have become heavily focused on aligning CIC with paying off the mortgage but this study highlights that it isn’t a prime driver for consumers.”
Lakey added that, within the past 10 years, there has been “tremendous” improvements in the quality of CIC products being developed but the industry was “clearly failing” to communicate these.
“With further product evolution, there is an opportunity to change the narrative and reposition the product to address a younger generation, whose fear of being able to rely on the state for their health now and in the future is a real and profound need.”
Misconceptions
The report also found a “significant” lack of consumer awareness about critical illness cover, including several misconceptions.
While 49 per cent of consumers didn’t know if advisers charged for advice, almost two thirds (63 per cent) of the remaining respondents believed they did charge a fee.
However, when the respondents were made aware that advisers typically don’t charge a fee for protection advice, have access to better quality products, and have access to research tools to help get the best quality policies, they appeared more receptive to protection.
While 85 per cent of consumers said they have not taken advice for CIC, CIExpert stated an "opportunity exists", as almost half (47 per cent) said they would consider it.
This was found to rise among younger people, with 62 per cent of Gen Z and 57 per cent of Millennials saying they would consider advice.
HSBC head of product and chief distribution officer Mitchell Barker said: “CIExpert’s report shows conclusively that the industry needs to work to work harder to communicate how critical illness polices have evolved to meet customer needs.
“Value-added benefits will continue to be a major area of industry innovation and will drive increased customer engagement throughout the lifetime of the CI policy.”
tom.dunstan@ft.com
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