Critical illness (CI) insurance products have evolved since arriving in Canada 25 years ago. And although the prices of these products have risen considerably in recent years, most of the other changes have made the product more appealing to clients.
With more changes in store that could dial back some of the features currently available, however, you would be wise to talk to your clients about CI insurance sooner rather than later.
“There are going to be a lot of changes to this product in Canada,” said John Shayer, director of business development with Quebec City-based SSQ Life Insurance Co. Inc., speaking at the Independent Financial Brokers spring summit in Toronto. “The real opportunity is here now for this product.”
> The end of guaranteed premiums?
Specifically, Shayer said, Canada is one of only two countries left where insurers offer guaranteed premiums on CI policies. In other countries, policyholders face the uncertain prospect of their premiums rising over time once the policy is in force. He expects Canadian insurers to eventually follow suit.
“It’s going to change,” Shayer said. In the meantime, however, advisors should urge clients to take advantage of the guarantees while they’re still available.
“What a great opportunity for all of us to go and see clients, and tell them about these changes,” he said.
> Rising premiums
The most noticeable change to CI policies in the past few years has been rising premiums on new policies, a trend that has made the product a tougher sell.
The price increase was attributable to the low-interest-rate environment and a need to “keep products profitable,” according to Karen Terry, assistant managing director of insurance research with the Life Insurance Marketing and Research Association (LIMRA). Sales of CI policies in Canada fell by 8% in terms of new premiums last year, as a result of the price hikes, Terry says.
> New features and options
Aside from the higher pricing, however, most of the changes to CI products in recent years have been favourable to consumers and advisors, according to Micheline Varas, senior vice president, living benefits, and managing partner with Customplan Financial Advisors Inc. in Vancouver.
“A lot more features have been added,” she says. “It makes it more conducive to sell something that has more features built in.”
For example, insurers have continued to expand the list of conditions covered by CI policies, with some now covering up to 30 illnesses and medical conditions.
Many insurers have also created CI child plans, providing clients the option of getting protection for their children, including coverage for specific conditions that are more common among children.
That has proven to be a popular option among clients, advisors say, as it provides parents with the comfort of knowing that they’ll have the resources to take time off work in the event that their child gets sick. In some cases, these policies become regular CI policies once the child turns 18, providing coverage for the rest of his or her life.
“[Insurers] have expanded on the child CI concept, because they saw that it was of value,” says Tim Landry, living benefits consultant with Montreal-based QTR Solutions.
Many insurers have also added various assistance services as a benefit for CI policyholders and their families, such as access to healthcare specialists and support in coping with the emotional stress of a critical illness.
> Simple-issue policies
Some insurance companies have launched simple-issue CI policies, which are underwritten based on several health questions rather than a full medical exam. Most recently, Waterloo, Ont.-based Equitable Life of Canada launched Living Protection, a simple-issue policy providing coverage ranging from $10,000 to $50,000 that can be issued in just two days.
Those policies are appealing to clients who want a basic CI policy with a lower level of coverage. “It’s started to become popular in the last year or two,” Landry says.
> Benchmark definitions
Another positive product development in the past few years has been the adoption of industry-wide benchmark definitions for the conditions commonly covered by CI policies. Previously, a condition that qualified for a claim under one insurer’s CI policy might have been denied by another insurer, depending on the definition used under the policy. That made it difficult for advisors to understand exactly what was covered when selling various CI policies.
“Now it’s a little bit easier to compare [policies],” Varas says. “The definitions are consistent, which is really good.”
This is the third article in a three-part series on critical illness insurance.