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Why does Critical Illness remain so unpopular?
Critical illness has long been the target of fierce criticism from both consumers and the financial press. However recent figures show that in the past year a record proportion of claims have been paid out by insurers whilst complaints to the Financial Ombudsman Service regarding critical illness have halved.
At the same time, critical illness as a product is surely becoming ever more relevant? Whilst our western lifestyles mean we are more likely than ever to suffer from a life-threatening illness, rapid advances in medical procedures and treatments are having a massive impact on survival rates. Yet despite these factors, critical illness sales are still falling steadily.
A simple explanation of this poor take up could simply be that consumer confidence remains shaken in the wake of the global financial uncertainty that has gripped economies around the world in the past year. However, it appears there is general agreement amongst many insiders that rather than being a consequence of the wider economic crisis, that this loss of faith amongst consumers stems from fundamental flaws within the system that the industry has been far too slow to address.
For a long time, insurance providers were seen to be focused on claims reduction only. That is, ensuring they paid out the minimum number of claims possible by whatever means possible. However, in doing so they failed to take into account the consumer and the damage that could be done to their reputation when claims are repeatedly rejected in a seemingly insensitive manner.
Recent figures show that this attitude has now largely changed but a further sticking point is the levels of rated or declined applications from providers which remain alarmingly high. This has proven to be massively off-putting for both clients and advisers and must surely be seen as having damaged the reputation of the product.
A further bone of contention has been the initial sales process. For a long time poor adviser knowledge and an inadequate sales system meant that consumers were not always receiving the best advice or a full understanding of the product they were purchasing. There have since been improvements made in this area however, yet again it seems it may be too little too late for today’s consumer.
As for the way forward, new products such as PruProtect’s Serious Illness Cover seeks to address the issue by offering policies that payout on a severity basis which they believe consumers will perceive as being fairer. The success of this has yet to be seen but what is clear, is that the industry still has a long way to go before it regains consumer confidence.
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