Critical illness products face a fight for survival as they come under threat from RDR proposals, the economic downturn and a crisis of confidence on claims.
According to Defaqto’s Critical Illness Report 2008, product innovation is key if these products are to flourish in the future.
However, recent RDR proposals, which downgraded protection products to the sales category where non or little ‘advice’ is given, may discourage more complex propositions.
Another major threat is the economic downturn as many critical illness sales are linked to mortgage sales which are in sharp decline.
The report also highlights a crisis of confidence in the protection industry and critical illness in particular.
“Bad publicity over claims and alleged unfair treatment of claimants has tarnished the product. IFAs, too, lack confidence that claims will be paid,” the report suggests.
It says the market is dominated by price driven propositions with 62% of IFAs saying price was the principal driver in product selection.
The report concludes that the future success of critical illness is dependent on increased industry focus in this area.
“More product innovations are required and greater marketing effort. Providers should address the tarnished image of the product with greater transparency over claims handling,” the report says.
Ben Heffer, principal consultant at Defaqto and author of the report, says improved distribution is also necessary: "Straightforward products that are targeted on basic client needs can be sold through banks and mortgage advisers looking for new revenue streams. Quality innovative propositions can be marketed through IFAs as part of their wealth management activities."
Defaqto's report Critical Illness 2008: A critical time for critical decisions is on sale priced £1,200 excluding VAT for a PDF version and £595 (No VAT payable) for a single printed copy. For further information please contact Luci Mylward on 01844 295509, or the Sales Department on Freephone 0808 1000 804 or visit www.defaqto.com
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