Critical illness insurance has come a long way since the idea was first conceived by Dr Marius Barnard in South Africa in 1983.
Originally named dread disease insurance because of the four life threatening conditions it covered – cancer, stroke, heart attack and coronary bypass surgery – the product has evolved significantly over the past 40 years to include many other serious health conditions such as Alzheimer’s Disease.
Since its launch into the UK market in the late 1980s, CI has seen a great deal of enhancements: the number of health conditions covered has increased significantly (in some cases more than a hundred); additional and partial payments have been introduced; and the product has been extended to include children.
We recently asked advisers: “Since the inception in 1983, which benefit, innovation or product upgrade has been your favourite and why? Also, are there any that you do not like?"
We initially began with the idea of listing the top 10 most popular CI developments since the product’s launch, however, having interviewed dozens of advisers, it is clear from most responses that the most popular developments fall into three clear categories: added/partial payments, added-value services and children’s cover.
There were also a few (understandably) dissenting voices who expressed frustration at CI’s ongoing market dominance compared to income protection, which is outsold by CI by around five to one.
Therefore, given the growing complexity of the market due to regular product changes, in this article we consider the history and evolution of the product, the features that have proven most useful and explore the benefits that have least served the sector well.
In the beginning
When Barnard first developed the idea for CI, he did so after acknowledging that medical developments and advances in science meant many people were living and surviving diseases that may have previously led to their death.
In many of these cases, the severity of the condition meant these individuals were living with life-limiting disabilities that affected their capacity to work and earn an income, leaving them facing financial hardship, which had a significant impact on their quality of life.
Identifying a gap in the market for an insurance product that paid out on the diagnosis of a health event that was either life changing or life limiting, but did not result in death, Barnard’s concept proved revolutionary and was a game changer for the insurance market.
Today, CI remains a key component of the UK’s protection market, with L&G, Aviva, Royal London, AIG and Vitality leading insurers in the sector.
Introduction of added/partial payments
The introduction of added and partial benefit payments was another game changer for the sector, with many advisers we spoke to citing this as one of the most welcome developments in the market.
Sometimes advisers use ‘additional’ and/or ‘partial’ as terms to explain situations where a smaller amount is paid out.
‘Additional’ is where these payments do not reduce the main sum of insurance, whereas partial payments do reduce the sum assured.
