How hard is it to design disability-based protection products in 2012, asks Andy Milburn.
Figuring out a strategy for how you design and offer a disability-based protection product ten years ago was easier than it is today.
Take critical illness products, for instance. A decade ago, there were a small number of new conditions, that providers or reinsurers had thought of, that consumers could add into their products.
Since the first ABI statement of best practice was introduced for critical illness cover, matters such as future-proofing and improved standard definition wordings have taken over as the main improvements that critical illness providers made.
If one is honest, these changes were not too tough to implement as people knew other providers would also make them. This helped critical illness product designs to stay similar.
In the past two years, design strategies for critical illness providers have started to evolve in a different sort of way: less tactical, less industry and regulation-led, and more strategic.
Severity-based cover came over from South Africa. Providers started to react to the PruProtect lead in this segment of the market by adding an ever-increasing number of new conditions to their more traditional critical illness products available through intermediaries.
The ABI chose to push a replacement for total and permanent disability in their last triennial review. That did not really end up anywhere. Meanwhile, providers continued to add new conditions.
Most of them who did not like playing the conditions race have now begrudgingly started to get involved in it. Is this a case of ‘If you can't beat them, join them'?
There are now four clear strategies emerging for providers in the critical illness market.
Strategy one: value for money
If a new condition does not have a price impact, does it have a risk impact? Is it worthwhile to be adding in conditions such as this, or are they just sales gimmicks? Is that really treating customers fairly?
A sub-set of this strategy includes the race to win the ‘ABI-plus' debate. Even though Ageas Protect has a high number of these conditions, half of the advisers we speak to do not seem bothered with this area, while the other half say that they care deeply about this factor.
Is the ‘ABI-plus' game our own version of Marmite?
What new conditions that the industry has added recently are justifiable? Some must be, while some must be inconsequential. Are we clear about which conditions fall into these two camps?
