The Evolution of Critical Illness

Can the product keep pace with medical advancement?

by Julie Pohjola

When most people think about critical illness insurance, they think of individuals who have been diagnosed with a serious condition. After all, that’s why critical illness insurance was initially.

But with the medical advances we have today, diagnosis and treatment of critical illness has changed rapidly. Critical illness insurance, however, has not. Critical Illness insurance has taken many turns over the past 30 years. It started out as a simple policy to cover the financial hardships that resulted after conditions such as a heart attack, cancer diagnosis or stroke.

• About 10 years later, the product was introduced to the U.S. market, bringing the simplicity of lump-sum payment design.
• Over time, many carriers tried a lot of different options to “improve” their product by increasing the amount of covered conditions that are more obscure, or less likely to occur; however, this caused an increase to the base policy cost. (Obscure conditions included occupational HIV, coma, and paralysis, among others.)
• The focus then turned to adding value by covering multiple events (e.g., diagnoses, illnesses, etc.) under the same policy, which added even more cost.
• In more recent years, carriers began providing minimal benefits for routine screening tests to help encourage the idea of prevention and allow policyholders to use their benefit if they weren’t sick.

Looking back at the evolution of the critical illness market over the last 30 years can show some small milestones. But, it doesn’t truly illustrate the direction the market is going or, more importantly, where it should be going. So, essentially, one could ask: Have we missed something?

A fault in our stars

It took a lot of time and research to understand that the way carriers were providing critical illness protection was in fact quite different from what consumers wanted.

Moreover, they kept doing the same old thing. So, as an industry, it’s time to change our way of thinking and accept that we can and should make changes to provide the best value to the consumer.

Many are probably familiar with the quote from Albert Einstein, “We cannot solve our problems with the same thinking we used when we created them.” Come to find out, that quote bears quite a resemblance to this product and it’s development. It may be time to think differently about what it can and should do today.

The reality

A third of all critical illness claims in the industry are denied. And the top three conditions, even after 30 years, still remain heart attack, cancer and stroke. They account for more than 90 percent of all critical illness claims experienced today.1

The leading factors for claim denials are: conditions not being covered; or definitions, which trigger the benefit, not being met. Consumers are submitting claims for early indicators of an illness or an early stage diagnosis, for which they expect a benefit. And then, to their surprise, they get denied because of old policy language that covers only conditions found at much later stages.

Turning the corner

Secondary research can only get you so far, and carriers often rely on it to develop their products. But, what better way to understand what consumers want in a product than to listen to the experiences of those who need it?

What carriers should be doing is getting into the minds of their consumers prior to product development and then building solutions around those insights. Our consumer research suggests that what people really want and need in a critical illness policy is not offered, as a whole, in any typical product on the market today.

Consumers want value throughout their lifetime and access to benefits through every life stage, healthy or ill, including preventive measures, early identification, to early stage diagnoses and late-stage diagnoses. They want coverage for the full spectrum of health and illness.

The top five features consumers nationwide asked for according to the research include:

1. Even more support for the healthy to remain healthy
   What encouragement do we provide for policyholders when they take the initiative to complete preventive measures and avoid illness? The typical routine screenings are not enough. Consumers want more preventive benefits, such as coverage for follow-up tests when medically indicated, genetic testing and educational resources to help maintain a healthy lifestyle.
2. Support for caregivers
   Caregivers are typically the ones who deal with a lot of the ins and outs of the medical and treatment process. They take on immense responsibilities as they attempt to manage caregiving, additional expenses and their everyday life. Consumers want educational and financial support when a loved one they are caring for is diagnosed with a critical illness.
3. Coverage for the full scope of an illness
   Critical illness insurance policies today may provide some support for early stage diagnoses, but most focus on providing significant benefits for late-stage diagnoses. Because a critical illness diagnosis at any stage can result in great financial uncertainty, consumers said they want benefits for the full scope of disease – from early identification of a critical illness, to an early stage diagnosis, through more serious stages as the disease progresses.
4. An affordable focus on the conditions that matter
   As carriers try to enhance their products by adding more conditions to the list of those covered by critical illness insurance, the cost of the policies increase. Policyholders gain little value because they often are not diagnosed with the more obscure illnesses. Consumers today said they want more affordable coverage for the conditions they are most likely to face – cancer, heart attack and stroke, which means, take out those obscure illnesses and create an affordable option for them as a rider.
5. Make it simple and take the uncertainty out of obtaining a benefit.

A critical illness diagnosis is a life-changing event that can evoke a lot of anxiety. Consumers said they should not have to worry about receiving benefit payouts during this challenging period. Research showed that consumers want critical illness insurance to:

• Use simple language for diagnoses when it comes to what’s covered and what’s not. They want it spelled out clearly and upfront.
• Eliminate confusion over benefit payments (what qualifies and when/if it will be paid).
• Pay benefits even if the policyholder had the condition before.
• Maintain the same premiums for the life of the policy.
• No reduction of benefits because of age.

Putting it all together

The world of medicine has changed dramatically to help prevent diseases from ever happening.

Doctors are diagnosing illness much quicker, yet critical illness insurance hasn’t evolved in this way of thinking, mainly, how it provides coverage and triggers benefits. Due to the increasing amount of earlier diagnoses, more and more consumers are not being afforded a benefit at this level – leaving them confused.

And, should they remain healthy, they aren’t able to tap into the benefits of their policy at all, which now offers little value to the consumer for doing what they are supposed to do – take care of themselves. Consumers want more value. They want multiple ways to use their policy over time. The market is changing and if we want to provide real value, then we need to change with it. ♦

End Note 1. Gen Re Critical Illness Insurance Market Survey Study, 2013/2014