IFAs may need to give "serious consideration" to finding new revenue streams, suggests Datamonitor, ahead of a potential slump in the critical illness market.
Although the research firm is not predicting a crash in public interest, Datamonitor says the growth of this £330m market is expected to slow to over the next five years.
CII is not anticipated to grow by less than 20% by 2008, however, this compares with overall growth of CII of 65% from £200m to £330m since 2000, because mortgage-related sales are likely to decrease and advisers will turn their attentions again to investment, suggests Janett Weit, lead financial analyst at Datamonitor.
"Whilst this is not a market in collapse, the good times have undoubtedly come to an end. The housing boom is cooling off. Although it will still enable further growth in mortgage-related sales to take place, they will be at a much-reduced rate to that seen in 2000 and 2001," adds Weir.
Critical illness take-up has been significant over the last four years and the design of products has regularly evolved. That said, a rapid rise in claims and increased survival rates has already prompted some sectors of the market to suggest current CI products will soon be placed under even greater pressure because certain medical conditions – covered by CI policies – are no longer seen as critical yet may prompt a payout under the term’s of an individual’s existing policy.
Given the changes in medical terms required to make CI policies workable, Weir is also warning IFAs to ensure consumers are fully aware of all the restrictions and conditions of a policy.
Her fear is the alteration of definitions and allowable conditions by life insurance firms could lead to claims of mis-selling while policies are still active.
Contact Datamonitor for more information on the CI report.IFAonline
Paul Bruns and Elaine Parkes
3,000 left to transfer
Record numbers of people aged 90 plus
From 3 to 10 October