The financial research company said the guide provides guidance on how advisers can take advantage of the potential in this market and offers a five point sales plan.
According to Defaqto’s Critical illness guide, a critical illness policy is not just about the number of illnesses covered, but whether a policy covers conditions people are likely to claim on.
Defaqto research found claims dominated by a small number of illnesses, including cancer and heart attacks, which are on average responsible for 60% and 10.2% of claims respectively.
In the last year providers made 11 enhancements to existing propositions, confirming a trend towards enhanced definitions (ABI+) and away from reliance purely on the number of conditions a policy covers. At the same time since March 2009, the average number of conditions covered has increased by just two, from 34 to 36.
From an adviser perspective, the key issue is how advisers can convert the potential value of critical illness into sales.
Defaqto’s guide offers a five-point plan for restoring value:
1. Position critical illness as a lifestyle protector, rather than simply a mortgage repayment vehicle.
2. Sell critical illness and income protection as a package, to cater for both regular basic needs and to provide a lump sum to address capital needs.
3. In the absence of income protection, sell high sums assured for income generation.
4. Recommend a policy for your client based on the value of cover not simply the number of illnesses.
5. Sell health – products that have health and wellbeing programmes encourage clients to live healthier lifestyles so that they may never need to claim; and some give premium discounts in return for improved health regimes.
Ben Heffer, Defaqto’s Insight Analyst for Life and Protection (pictured), said challenges facing the critical illness market were low penetration, lack of value for the industry and dented customer confidence.
He added: “The key issue is how much capacity or appetite advisers have to reach out to people beyond their traditional client base to increase protection sales. The opportunities are there – the question is how advisers can take advantage of them.
“At the heart of this approach must be a focus on the features and benefits that policies offer and ensuring that they fulfill a clients’ specific needs – rather than focusing on price or on finding the option that covers the largest range of illnesses.
“Only once consumers are re-engaged will advisers be able to convert the potential value of critical illness cover into tangible value for their business.”
