Level Term Critical Illness market overview
18 September 2019
Size of the market
Term assurance with accelerated critical illness benefit makes up 90% of critical illness sales and, based on our research, is the most popular financial planning product with financial advisers after straight life cover. Level term with critical illness cover serves as a lifestyle protection product; and decreasing term with critical illness cover is largely a mortgage protection product. According to SwissRe, in 2018, level term with critical illness policies accounted for 16.7% of all term sales.
SwissRe reports that sales level term with CIC rose by 3.2% in 2018 and, earlier this year, iPipeline reported £19bn worth of critical illness cover was sourced through iPipeline in 2018. These positive indicators for critical illness are encouraging and resonate with a renewed interest in long term protection.
Guide to Minimum Standards for Critical Illness Cover
The ABI’s revision of the guide in 2018 introduced a number of changes, which providers were required to adopt, where appropriate, by Q1 of 2019. There is no longer a model wording for terminal illness set out in the guidance, but most providers continue to offer terminal illness cover as a function of the life assurance element of an accelerated arrangement anyway, and many also continue to offer terminal illness on their stand alone cover too.
A model wording for HIV Infection is no longer offered as it was considered to be discriminatory and insurers may now use their own words to describe the cover they offer, if any. All bar one provider continue to offer this cover.
The cover for loss of hands or feet was recast as loss of hand or foot reflecting the more generous definition already offered by almost all providers. This, therefore, has resulted in little change to products. Some providers continue to offer the harsher definition.
The cancer model wording now permits early stage papillary thyroid cancer to be excluded. However, so far, only two rather peripheral providers have brought such a definition to market.
Universal Credit means testing
Under the concession gained from DWP by the Building Resilient Households Group, using terminal illness and critical illness benefits to pay off a mortgage debt are now no longer regarded as a deprivation of assets for means testing purposes. This is good, but for level term policies intended to compensate lifestyle rather than cover mortgage debt, the pound-for-pound offset against state benefits could be seen a s a disincentive to purchase.
Trends in critical illness cover
The trend in the development of the product was for many years based around the addition of ever more weird and wonderful conditions; then the emphasis shifted to the addition of severity-based conditions for less serious forms of disease for a lower pay out – either a partial payment or an additional payment. The average number of conditions has steadied in the last year and emphasis on ABI+ conditions has waned since 2017. New more detailed measures of the value of critical illness cover have come to market, not least Defaqto’s CIC Compare.
Number of products and providers
There has been a significant increase in the number of products in the level term critical illness space. This is due to three new providers coming to market, and the expansion of some product ranges.
Since May 2018, there have been product launches in the critical illness cover space, including the launch of Guardian, a completely new protection proposition and relaunches of Zurich and Canada Life’s ranges.
Additionally, we have seen new products from organisations in the bancassurance sector and products designed for direct-to-consumer distribution. Typically, life and critical illness cover products are offered on a level, increasing and decreasing basis to cater for various customers needs.
In addition to new product launches, there have been a significant number of developments to existing products, including the addition of new critical conditions and/or enhancement to existing definitions.
- AIG Life
- Old Mutual Wealth
- Legal & General
- Royal London
- Budget Insurance Services
- Forester Life
- Budget Insurance Services
- Sainsbury’s Bank
- Clydesdale Bank
- Yorkshire Bank
- Legal & General
- AA/Nationwide/Direct Line
About Defaqto Star Ratings
Defaqto Star Ratings for financial products are based on our independent, expert analysis of the most important product features and benefits. These criteria cover a range of feature categories, encompassing the key areas of the product being analysed. You can view current Star Ratings displayed in Defaqto Engage or by visiting our dedicated website.
About CIC Compare
CIC Compare helps advisers compare historic and current critical illness policies from the whole of market including Vitality in under five minutes. Our unique transparent scoring methodology focuses on the quality of the definition of the condition rather than just the statistical risk, which leads to better client outcomes should they be affected, as well as allowing advisers to cater for their clients’ specific needs. Learn more about CIC Compare.
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