Critical illness insurance: Insurers multiply innovations to Soften the Impact of rate increases

By Caroline Phémius | April 19 2005 03:52PM

Never have so many new versions of critical illness insurance products sprung up in such a short time! Reinsurer Munich Re sparked a chain reaction by announcing critical illness insurance premium hikes last year: insurers across the board have been cushioning price increases with added value.

The industry knew that Munich Re’s hard line would have major repercussions in the critical illness insurance (CI) segment, but the real impact of this stance in the field was anybody’s guess. The prospect of having to hoist the premiums of a product that advisors had just begun to get used to has pushed suppliers to be creative.

In the past six months, new assistance programs have surfaced, and several insurers are including in their policies illnesses that are very rare and conditions that are not life threatening. The hallmark of a bona fide product revolution: some insurers are taking a run at a traditional preserve of banks: CI to cover mortgage loans.

All-inclusive assistance

Assistance is more prominent in CI policies than ever. Previously summed up by Best Doctors, CI assistance now features an array of services that encompass a growing number of players. Great-West Life and La Survivance recently broke new ground in this service line.

Best Doctors is only one of many services available to La Survivance clients. Insured that contract a covered illness will receive benefits during convalescence. They can also obtain psychological, legal or residential (plumbing, electricity, moving, etc.) assistance, together with access to a health info hotline.

Great-West has teamed with Warren Shepell to supply services such as psychological assistance to its clients. “We noticed that services such as Best Doctors, Warren Shepell, etc. are vital to our clients’ morale when they file a claim,” says Michael Byrne, assistant vice-president, marketing and living benefits at Great-West.

Asked about these two trendsetting insurers, most of the competitors confirmed that they would consider offering more services. “We are keeping a close eye on what’s happening in the market,” said Steve Carter, vice-president, marketing, of AIG Life Canada.

AIG has expanded its existing assistance services. Notably, all members of the insured’s immediate family can now receive Best Doctors services.

At AXA Canada, Horizon Life CI policyholders can now draw on broader expertise from AXA Assistance. On top of the four assistance services included in Doc Access (second opinion by a doctor, psychological help, etc.) since March 2002 clients now have four more, including health info and legal aid.

More illnesses than ever

Many insurers now cover more illnesses. Canada Life, Great-West, AIG, Standard Life Canada and Desjardins Financial Security (DFS) have added bacterial meningitis and aplastic anemia.

DFS went further by officially announcing the marketing of its new product on Dec. 24, which now covers four infectious diseases: West Nile Virus, Lyme disease, E. coli bacteria and flesh-eating disease. No competitors had jumped on board at press time. “There aren’t many of these cases today, but these illnesses have caught the public’s attention. We wanted to get a head start on the competition,” says Nathalie Tremblay, health product manager at DFS.

Rare illnesses are not the only new additions to some portfolios. DFS, Great-West, Industrial Alliance and Sun Life Financial are standing out by covering illnesses such as valve replacement and aortic surgery, that were fairly common in CI, but which were not yet part of their products. AIG drew the line at valve replacement.

New markets

Insurers are also targeting a market where banks reign: CI for mortgage holders.

By adding a renewable T-20 coverage option to its CI product Life Cheque, Manulife Financial is taking precise aim at this market, said John Parker, assistant vice-president, product and marketing, living benefits, individual insurance. Although this new insurance can be underwritten for other purposes, Manulife has set its sights on this market in particular, he continued.

Also sensing the potential of this market, Unity Life launched a brand new life insurance product with CI coverage. MortgageADVANTAGE, in early January 2005.

The latest addition to its CI product line is a decreasing term plan with guaranteed uniform premiums. To match their mortgage repayment horizon, clients can choose between T-10, 15, 20 or 30. Tony Poole, senior vice-president, sales and marketing, said that this product is spearheading the company’s strategy to rival the banks.

The Unity Life policy consists of two plans. The first, MortgageADVANTAGE, includes life and accidental injury critical illness insurance. The second, MortgageADVANTAGE “Plus,” features life, accidental injury critical illness, and critical illness insurance. “In the first case, if the client is seriously injured in a car accident, we will pay partial benefits to cover the mortgage. With MortgageADVANTAGE “Plus,” if the client contracts a critical illness, we will pay the mortgage amount in full,” Mr. Poole explained.

Sun Life is also venturing into new markets, armed with a new product. Since the merger, the insurer had been distributing the Clarica CI product exclusively. But in March, Sun Life launched Sun Critical Illness Insurance. Tailored to business people and an affluent clientele, this product can be purchased with a T-10, T-75 or T-100 premium.

The minimum insured amount of the policy was set at $100,000, says Diana Deverall-Ross, vice-president, individual health insurance. “Our target market expects a policy of at least $100,000.” In addition to covering 24 adult illnesses, the Sun Life product offers a special policy for children, which includes five childhood illnesses.

The innovations will go on, says Benoît Miclette, vice-president, living benefits, for reinsurer Munich Re. “The product is still growing vigorously and new features are surfacing every 18 months on average.”

Assumption Life, for one, plans to launch an online CI product. The insurer had not returned our calls by press time.