Robert Morrison takes a look at critical illness cover and sings the praises of traditional CI over severity based policies.
An interesting article on the COVER website caught Aviva's eye last month. According to an independent study from one provider, more than half of people who hold or were thinking of buying critical illness (CI) cover, would prefer a severity based product compared to traditional CI policies.
We were a little bit cynical about the findings - as has been said about such supportive surveys before: "Well, they would say that, wouldn't they?" But it is genuinely surprising what reason customers gave for reputedly preferring this type of product - namely, the likelihood of pay out.
Apparently, the probability of payment was the most important aspect of protection for 87% of the 652 people questioned in this study. We can only agree. Anyone purchasing a protection product would be right to consider, in the event that they should need to make a claim, how likely would they be to receive any money?
It is odd though, given that the critical illness claims rate throughout the industry is at a record high - 94% in Aviva's case - that these findings should come from a provider who has never published its claims figures for the product in question.
Surely, this is just a matter of time and, as a relative newcomer to the market, the scenario is perhaps understandable. But when the company in question does publish its rates, it will be very interesting to know what proportion of payments were for the full sum assured.
Much has been said about the need for clarity and transparency across the protection industry. And much work has been done to achieve this. So it seems a bit of an ironic conclusion from this quarter.
This is deliberately contentious - and perhaps unfairly so. There is no problem with a provider promoting their products. We know that six out of ten families in the UK are inadequately protected, so anything that can be done to overcome this issue is a good thing.
Always the best way to go?
What is in dispute, however, is the idea that severity based CI is always the best way to go. Certainly, it is a matter of personal choice, and what works for one person may not be the preference of another. But there are a few other points to consider.
One of the most compelling arguments for choosing a severity based product - also known as serious illness cover - is the apparent range of conditions covered by the policy. If one product covers 100 or more conditions, and another (traditional) product offers protection against 30 to 40 conditions, then it seems to be a bit of a no-brainer that bigger is better.
