15 March 2010 / by Rachael Stiles
Critical illness insurance sales have remained strong, despite declining mortgages sales – to which they are often linked – and have not fallen as much as expected.
Defaqto has said that a fall in mortgage lending of £362,632million to £143,506million between 2007 and 2009 caused a subsequent fall in mortgage-related critical illness insurance sales of 19.5 per cent, but that total critical illness insurance sales only fell 4.7 per cent in the same period.
Explaining the continued strength in sales of critical illness cover, Ben Heffer, Insight Analyst at Defaqto, said: “Protection policies are ‘sold’ not ‘bought’ and protection advisers have simply had to work harder for their sales. Advisers have had to increase their sales efforts to counter the difficult conditions caused by the recession and householders’ desire to rein in spending.”
Mr Heffer said that because critical illness insurance is a complicated product, advisers have had to work harder to explain the benefits to customers, such as the long term value, the increasing number of successful claims, and product innovation, such as health and wellbeing services.
Defaqto has also identified a new phenomenon, he continued, ‘condition inflation’ which has resulted in an increasing number of critical illnesses being added to policies, over and above those conditions responsible for the vast majority of claims.
“This does add further complexity but advisers should not overlook that the policy with the greatest number of conditions may not really represent the best value for their client,” Mr Heffer said. “The value of a critical illness policy is invested in the quality of the definitions and not simply in the number of conditions covered.”
Defaqto has this week published its first critical illness guide, which explores the ‘real value’ that each individual critical condition adds to a critical illness insurance policy, making it easier for advisers to sell policies on the basis of the quality rather than the scope of the cover.
The guide will also offer market background, the challenges facing the industry, and an analysis of the various products available on the critical illness insurance market.
© Fair Investment Company Ltd