This is a brave article to write. Not so much because of the topic – although this does contain views that will displease some – but because of print deadlines meaning significant things could have changed between my writing of this on a pleasant summer evening and your reading as leaves start to change colour.
I would urge all with an interest in the CI market to engage with the SoBP when the opportunity arises, the really interesting work will come after as we see the real motivation for some of the changes coming through.
The long term forecast is that the relative cool of the Protection landscape this autumn will be warmed by heated discussion around the future of critical illness products prompted by the ABI's critical illness (CI) Statement of Best Practice (SoBP).
The ABI produces this SoBP every three years. I chaired the last one and am a very interested observer of this year's. The aim of this work is to produce a common market standard of a basic CI product and the terms used to describe it. It intends to ensure an effective market can operate with an understanding of the similarities and differences between products.
The 2014 SoBP three years ago was (in part fortunately and in part deliberately) a reasonably quiet affair. We distinguished and defined additional and partial payments, acknowledged the existence of 'ABI+' definitions and assigned a standard to these, and slightly amended some definitions to meet changing market and medical practice. We didn't go round in circles about TPD (Total Permanent Disability), add loads of definitions or take a deep cut to the basic coverage offered.
Reflecting on the experience, the initial meetings can be amazingly anecdotal. On a human level it's quite refreshing that in a world of actuaries, doctors and underwriters, many of the first insights are personal frustration where people have felt the coverage "does not do what it set out to do". At times this felt like the people who set out the rules of the game were complaining about the outcome.
That experience led to an early sense of foreboding whenever the great and the good start explaining what "the product set out to do". This seems to become one of those great campfire stories about times of yore, which all choose to sculpt to their own views while reminiscing: "Aaagh, Old Chief he tell me Silent Heart Attack would never a CI definition make".
Common themes from these fables tend to be that:
- someone must suffer before we give them money
- technological advances may bring the end of the critical illness world
- we must all keep flying to the bright, beautiful CI light
So what about this time?
It is expected that there will be more fundamental changes as a result of this SoBP. There are some good reasons for this – there are incrementally clearer threats to the traditional CI model now than there were three years ago.
The diagnosis of many of the lower impact critical illnesses continues to increase, and the prognosis for these continues to improve. These two levers mean that left unchanged, while the impact of suffering an insured condition is decreasing, the cost of the cover would have to increase.
Furthermore, there are justifiably different approaches being taken by different insurers to the grouping of conditions being developed. Should we define dementia in one definition or four? Should we adopt the same approach to other conditions like heart conditions?
To get (even more) technical – the SoBP guidance to date has said that if 75% of the market has the same definition heading, there should be an agreed ABI wording. If half the market are splitting out definitions to maximise the number of conditions covered, and the other half are putting together to try and simplify the appearance of the product, it is difficult to maintain this approach. The most pragmatic approach may now be to retreat to base camp – and just define the conditions at the very centre of the CI product (those causing over 80% of claims) and leave the market to do their best on the rest.
The future of CI
I believe better products would have developed than the current form of critical illness if we didn't have ABI industry wordings. The ABI wordings have such a strong gravitational pull, you need to develop something in another galaxy or you get sucked into the CI orbit. Many have listened to what people really want and built something based on impact and need, but found themselves burning up in the heat of contact with sales and marketing teams with the power of "numbers of conditions" and "ABI+ conditions".
Whilst some products more directly linking the impact of the illness to the financial support given might have grown without the ABI approach, I recognise the market would have been even tougher to navigate as a consumer or adviser. Therefore, it seems quite likely that fewer products would have been sold. This seems a case where a good outcome for many trumps a better for one for fewer.
In this context, a retreat to fewer defined conditions may give the market the breathing space to create comparable but distinct products at last.
Ultimately the ABI SoBP does need to ensure that the basic product it defines is insurable – but I do not believe it should be influencing the market beyond that.
There are times when companies recognise that setting the "standard" cover at a deliberately cautious level allows them to take credit for doing something above the industry standard before the ink is even dry on the document. Therefore, while I would urge all with an interest in the CI market to engage with the SoBP when the opportunity arises, the really interesting work will come after as we see the real motivation for some of the changes coming through.
I hope this will mean new products with simple claim triggers clearly linked partially to diagnosis and partially to observed impact. Others will have different ideas – and so long as some resonate with customers we should have an exciting marketplace to improve our ability to help people when they really need it.