Critical Illness Insurance was developed in South Africa in 1983 to mitigate the costs associated with medical treatment and the concept was soon exported around the globe. Nowadays it plays an important role in many markets, particularly in the UK, Canada and the Far East. It has been adapted in various countries to meet customers’ needs, regulatory obligations and market nuances.
In the UK market, to aid the development of the product, the Association of British Insurers (ABI) prepared a Statement of Best Practice that is designed to ensure that customers and intermediaries understand the product and are able to easily compare the various offerings from market providers.
While CI cover sales have ebbed and flowed over the years, mainly because the product is inextricably linked to the mortgage market, the “best fit” line shows a downward trend in sales year-on-year. Another less obvious factor that has affected product design and sales has been the reinsurers’ view of the guaranteed element of the product, which led to an overnight reduction in reinsurance capacity. Put simply, demand outstripped supply leading to an increase in premium rates.
So what are the likely future developments for CI cover? Will there be more of the status quo, or a move towards complex severity-based products, which will pay out set percentages based on the degree of impairment resulting from the condition?
Although we cannot predict the future, it is likely that there will be a range of CI products, and at the heart of most of them will be the desire to meet our customers’ perceived needs, based on the nature of the claims we receive. Conditions may be tweaked as medical advances develop, or when providers review their claims’ portfolios to see if they can meet and offer wider coverage. Recent enhancements, for example, have meant that ductal carcinoma in situ (DCIS) and low grade prostrate cancer are now covered.
Tags: Association Of British Insurers, Best Fit, Carcinoma, Critical Illness Insurance, Downward Trend, Ductal Carcinoma, Fit Line, Intermediaries, Medical Advances, Medical Treatment, Mortgage Market, Move Towards, Nuances, Percentages, Portfolios, Prostrate Cancer, Regulatory Obligations, Reinsurance Capacity, Reinsurers, Severity
