As the pandemic has forced insurers the world over to innovate, what might this mean for critical illness cover? Simoney Kyriakou reports
The UK is emerging from a year of lockdowns, vaccines are being rolled out and people are starting to resume normal activities, such as going to the gym or to the GP.
And as insurers the world over start assessing the effects of the pandemic on their claims and conditions covered, what changes might brokers expect to see in the world of critical illness cover (CIC)?
In 2020, Legal & General published its claims statistics, which showed 41% fewer policyholders claimed on their CIC in April than the typical figure of 300 claims a month. Other providers have cited similar drops of between 30% and 40% in CIC claims.
This reflects research by The Health Foundation, which showed face-to-face GP appointments in England declined from January 2020, falling nearly six million by March that year.
Debbie Kennedy, director of protection at LV=, says: “We expect to see the effects on claims lasting for several years.
“We are anticipating a rise in advanced-stage cancer diagnoses and claims in 2021 and 2022, caused by a backlog of screenings and delays to early treatment.”
There is a huge mental health issue as well, says Ms Kennedy: “Millions of people are struggling with mental health issues caused by isolation, coping with lockdown and financial worries.”
As a consequence, she expects a swathe of mental health and cancer claims to come.
“It is going to be interesting to see what happens to the CIC market after Covid,” says Alan Knowles, chairman of the Protection Distributor’s Group.
“There is a lot of talk about missed cancer diagnoses and this could lead to more CIC claims. That could lead to the cost of new policies going up, which could mean fewer people purchasing cover.”
And, even with the vaccine rollout, there is still the issue of ‘long Covid’ and what this means for premiums.
Could the need to think more widely about pandemic cover or long Covid see more innovation in the market?
Alan Lakey, founder of CI Expert, says: “There seems to be an increasing appetite for insurers to rethink their marketing by looking for niche products or partnerships with companies offering a viable outlet for their products.
“Many of these ideas falter due to lack of take-up, but some will gain traction and their success may well serve to motivate others to look at new ideas and inspiration.”
For example, in Nigeria, life insurer FBN Insurance – a member of the Sanlam Group – partnered with travel insurance company Collinson to launch SmartHealth International.
This package means employees and their families can get cover for treatment abroad, should they develop a critical medical condition that cannot be treated adequately in Nigeria.
However, this particular product does not pay out if you develop a critical illness – it only covers treatment cost – and Garry Webb of adviser firm Roxburgh Financial Management is not sure this sort of linkup might be a template for wider development.
He says: “The only benefit I can see when combining the two covers would be cover for total permanent disability and death while travelling. As such I don’t see a huge impact in the standard CIC market.
“The problem with CIC is it doesn’t lend itself to being merged into any product, other than life assurance,” adds Mr Lakey.
Ben Burgess, senior adviser at Lifesearch, also doubts there will be “much further crossover” between travel insurance and CIC, mainly because travel is annually renewable, and CIC is long-term insurance.
Also, he adds, it is better for the end consumer when products are not bundled together.
That said, he anticipates Covid-19 will drive changes within the market, regardless of how successful the vaccine rollout will be.
He comments: “It will be interesting to see what insurers do following the pandemic, not just for CIC but also for income protection (IP), which is more relevant for long Covid.”
Fewer critical illness policyholders claimed on their critical illness cover in April 2020 than the typical figure of 300 claims a month Source: Legal & General
Already, if any virus were to cause one of CIC’s listed conditions, such as kidney failure or mechanical ventilation, Mr Burgess would expect a CIC policy to pay out.
Nor will a vaccine eradicate the need for CIC to cover serious Covid infection within its intensive care definitions, as it already does.
But Mr Lakey believes: “There remains scope to include a condition that incorporates diagnosis of a serious infection without the need for ventilation.
“The trend has been for conditions to be combined where they share a common claim trigger, such as traumatic brain injury caused by trauma or due to anoxia or hypoxia. This will widen the scope of many plans beyond the usual headline condition names.”
In March, Holloway Friendly removed its Covid-19 exclusion from new business, with the exception of plans with a one-week deferred period. Others may follow suit.
Another side effect of the pandemic could be more interest in CIC and IP, even if people are vaccinated against Covid-19, says Roxburgh’s Mr Webb. He therefore urges a “push” from providers to make the public aware of both types of cover and how it can benefit them.
But, as Mr Knowles adds: “The effects of the pandemic have been altogether unpredictable, so none of us know what the impact is likely to be.”
Simoney Kyriakou is senior editor of FTAdviser