Critical illness insurance: Market pressures spark innovation

By Alain Thériault | August 19 2013 05:55PM

Forced to raise prices or withdraw products due to low interest rates, insurers have sparked a wave of innovation in critical illness insurance and other living benefits products.

Simplified issue living benefits products continue to set the market pace. The latest wave of critical illness and income insurance products are leveraging their pioneer status to carve out a place in the market.

IA Excellence says it has enjoyed success with a product launched in October 2012, Cancer Guard. This guaranteed issue product gives applicants under age 65 cancer coverage without a medical exam.

Premiums of this renewable policy are not guaranteed. The product is offered in T10, T20 and T75 versions. T10 and T20 is convertible into T75. People who can answer no to two eligibility questions can obtain coverage of up to $25,000. The limit rises to $100,000 for insured who answer no to two additional questions. The contract ends when the insured reaches age 75.

Another rider, Prevention, covers certain non-life threatening cancers, for 50% of the sum insured, up to $25,000.
The policy is not limited to covering cancer. Clients who meet additional eligibility requirements can buy protection from other illnesses in a rider: stroke, coronary artery bypass surgery, heart attack, paralysis, coma or a list of five juvenile critical illnesses.

In eight months, the product has taken the market by storm. “Our Cancer Guard Guaranteed Issue product has been a real hit for us,” Mark Diedzic, sales director at IA Excellence told The Insurance and Investment Journal in July.

“Last year we did 6995 Cancer Guards and this year, to date, 8099, with steadily increasing monthly sales,” he adds.
One of the product’s main selling points is its ease of purchase. “I absolutely think there’s a trend toward simplified products because the underwriting is getting tougher and tougher. The feedback that I get from the agents in training meetings when I ask them if they had a policy rated or declined in the past is always a resounding yes!”

No medical selection

Because there’s no medical selection for this product type, customers can be assured that their medical information will not be entered in the North American central insurance database, the MIB, Diedzic points out.

The product is competitive. For example it will cost $23.30 per month for a male non-smoker age 35 who purchases a $50,000 Cancer Guard T10 policy plus the Prevention and Additional critical illness riders. This cost rises to $28 for the T-20 premium and $50.20 for T75. Cancer protection alone costs $18.50, $21.21 and $35.87 respectively.

All the same, the product covers a smaller range of diseases than typical CI. “The traditional fully underwritten products may cover a lot of critical illnesses. Still, with the rider, we cover pretty close to 95% of all CI claims in Canada, in one simplified issue policy,” Diedzic points out.

Why insure only cancer as the base illness? This niche product fills a pressing need in Canada. “Everybody know someone that has been affected by a cancer,” Diedzic says. In a presentation to advisors, he explained that 186,400 Canadians were stricken with cancer in 2012, according to estimates published by the Canadian Partnership Against Cancer.

The 2013 edition of Cancer in Canada estimates that 187,600 new cases of cancer will be diagnosed in Canada this year. Colorectal, prostate, kidney and lung cancer will account for more than half the cases. The findings also suggest a rise in liver cancer rates.

In its 2012 report, the Canadian Cancer Society predicts that two out of five people will develop cancer during their lifetime, that 500 Canadians a day will be diagnosed with cancer, and 62% of people affected by this illness will survive more than five years.

“There’s not only the price of drugs. There are emotional aspects to it and the peace of mind,” Diedzic says. In his presentation, he mentions that 91% of people will face lost income or increased expenses following a cancer diagnosis.

Just a click away

On July 2, Humania Assurance launched Insurance Without Medical Exam. The insurer is banking on the Internet to sweeten sales. Advisors can send quotes to the head office and have the policy issued the same day, by midnight at the latest.

The product must be purchased in person from an advisor, but consumers can consult the public section of the site to obtain information on coverage offered (critical illness, disability and life), to determine their eligibility or to request a quote.

The three forms of coverage available can be sold separately, in T10 or T20 format, with or without a premium refund option (75% after 20 years). The product offers maximum coverage of $300,000 following death, up to $2,500 per month to cover lost income, and up to $100,000 following cancer, heart attack, stroke or coronary bypass surgery.

The product targets customers who have had difficulty buying one of these three types of policies, says Stéphane Rochon, vice-president sales and marketing at the Quebec-based insurer.

Forced to quickly find a remedy for the dissolved partnership with Edge Benefits, known for its guaranteed issue disability income protection insurance product, RBC Insurance launched the Fundamental Series on May 1. The company created its own product rather than sign with another partner.

The Fundamental Series is aimed at self-employed workers or other employees who do not have access to group insurance. Coverage in case of injury is guaranteed. Illness protection is optional, and issue is simplified. The product covers lost income and general expenses for between $500 and $6,000 per month. Illness coverage ends at age 70 and injury coverage at age 75.

Illness insurance includes Best Doctors referral service. The product also offers 24-hour coverage, occupational and otherwise, partial disability benefits and a guaranteed reimbursement of $10,000 for medication in case of accident. There is no pre-existing condition clause. The product is guaranteed renewable. It excludes mental illness and subjective conditions like fibromyalgia and chronic fatigue syndrome.

Exclusion of mental illness is not absolute, Hamilton notes. The company has agreed to evaluate these cases individually before making a decision.

Own occupation is protected for 36 months.

RBC Insurance’s target market is unchanged since The Edge era: it aims to cover a market poorly served by disability insurance for self-employed and blue/ grey collar workers. The company offers its product in all networks: career representatives, managing general agents and independent advisors, national accounts (securities brokers) and under distribution agreements between insurers.

This product has high potential, says Mike Hamilton, senior vice president, sales and distribution at RBC Insurance. “Self-Employed is a growing market across Canada. Only 27% of the companies with less than 100 employees have DI coverage today. That market has gone unseen,” he says.

RBC Insurance is aiming high, Hamilton continues. “We are not only focusing on the blue collar but also the mid-market in general, which represents 65% of the Canadian population. It’s a big potential market to tap!” Nearly 2,500 advisors attended events leading up to the product launch, he adds.

Players in the simplified market trade-off high compensation for simplicity. RBC Insurance, like most insurers, offers reduced first-year commissions for this product type. For RBC Insurance, the first-year sales commission is 30% for the Fundamental Series, compared with 50% for the traditional disability product.