Senior insurance industry figures have predicted the end of critical illness (CI) insurance in its present form, and the death of guaranteed rates.
Speaking at the Cover Protection Forum in London, Alun Beynon, head of sales at Scottish Equitable Protect, said: “New treatments and diagnostic techniques are being developed at ever faster rates, and there are signs of a windfall mentality creeping into the market.
“Providers are currently issuing guarantees, offering rates and accessibility in a risk area where the goal posts are constantly moving. We need to go back to the drawing board.”
Nick Kirwan, head of product development at Scottish Provident and chair of the Critical Illness Steering Committee at the Association of British Insurers (ABI), agreed. He said: “There are those who believe that CI is not a priceable risk and those who think it is – but that we have priced it wrong. In a way we are waiting for the current product to fail before we produce a new one, but there is no evidence that consumers and advisers do not want some form of CI protection.”
Beynon predicted the rise of a hybrid of CI and income protection as the answer, offering a combination of a lump sum and a regular income. However, providers must be mindful of creating confusion and claims avoidance. “This is probably our biggest challenge,” he said.
Richard Walsh, head of health at the ABI, did not see providers agreeing on a new template for a future product. He said: “It will take one provider to put its head above the parapet and try a new product. But then it will take time to see if it is successful.” Walsh added that he did not see providers cooperating on a template for a new product but that he knew of inter-company discussions on the subject.