Scott Cadger, Head of Protection Platform Operations, Scottish Widows
Why Critical Illness Cover has remained important over the last 40 years.
To understand relevance, we need to ensure we understand context first. The first launch of Critical Illness is well documented, with this quarter being the point where we celebrate the 40th anniversary of Dr Barnard and the launch of CI in South Africa. Scottish Widows have long been proud of their partnership with Dr Barnard and the support he gave our business in designing our CI offerings in the past.
Watch: Getting to the heart of Critical Illness Cover - YouTube
Back then the focus was on dread diseases, those that would have material impact on your ongoing ability to work and support your family / lifestyle. The key four conditions covered were cancer, stroke, heart attack and coronary bypass surgery.
We wind forward 40 years and look across the protection market and we see the huge variety of critical illness propositions across the market. But if we look across the claims being made in the market, 3 of the same 4 conditions that make up the bulk of all CI claims seen, with preventative measures reducing the occurrence of coronary bypass surgery.
|
Claim Cause |
Male % |
Female % |
Overall % |
|
Cancer |
50.5% |
74.8% |
63.0% |
|
Heart Attack |
20.0% |
2.8% |
11.1% |
|
Stroke |
12.0% |
6.5% |
9.2% |
|
MS |
0.9% |
5.1% |
3.1% |
|
Other |
16.6% |
10.8% |
13.6% |
[source: SW internal 2022 claims statistics]
However, it does show that there are a sizeable minority of claims that don't fit into those top 4 categories. And as we look back at the changes to CI products since the initial dread disease product, we see increasing numbers of new definitions added as providers look to ensure the cover customers purchase continues to meet their needs and expectations of a critical illness. This is the right product evolution; understanding the changes in medical science, adapting underwriting and product features, improving benefits that give value to customers. Our protection industry has done well to keep pace with these changes, whilst making sure customers understand what they are covered for and meet their expectations if they need to claim.
Is there a role for Critical Illness Cover in the future?
This is a question that is debated at many an event across the protection industry. With threats of uncertain future claim trends, impact of UK and European legislation, improved diagnostics for conditions and the unknown, long-term impact of COVID and health service backlogs, it can paint a picture of doom and gloom around the CI proposition. And we're also seeing a (rightful) rise in the levels of income protection products being written in the market, against a backdrop of a squeezed consumer spend.
Recent research[1] shows that the number of people aged 20-69 (Critical Illness target market range) with major illness increased by over a quarter from 2.4 to 3million in the decade preceding the COVID-19 pandemic. This same group of people are only projected to grow 4% up to 2040, the main contributors to government revenue, which current spends £1 in every £5 raised on health care.
However, have the core reasons that Dr Barnard drove the introduction of CI cover into the financial services industry changed? Categorically no. there is still a pressing and significant need for lump sum financial support whenever a person is impacted by a critical illness. Whether this is to support adjustments in the home, give some financial breathing space to focus on recovery or pay off some or all of a mortgage, no other product supports customers with that level of benefit when it matters the most. There is a real future squeeze to come on our health care and associated support as mentioned in the report above, highlighting the ever-growing need for ensuring appropriate financial protection is put in place.
Which is why we at Scottish Widows celebrate looking back at the last 40 years of CI cover and its expansion, but our focus is on ensuring great, customer friendly products continue for the next 40 years and more. We are continuing to push on delivering comprehensive coverage without the complexity, which will ensure Dr Barnard's legacy remains across another generation of protection providers, distributers and most importantly customers, protecting what matters for them.
[1] [cite: Health Insight Report from p4 of exec summary https://www.health.org.uk/news-and-comment/news/25-million-more-people-in-england-projected-to-be-living-with-major-illness-by-2040]
