Is critical illness insurance too complex for the Internet?

By Daniela Cambone | January 20 2002 07:16PM

In the last few months two companies, TD Life and Clarica have launched their basic critical illness (CI) plans online. While it provides consumers with an easy-to-use means of applying for coverage, some brokers argue that it is too complex to be sold online.

“To choose a CI product is pretty complex. There is a lot out there for the consumer, they should try to speak to a specialist,” notes André Therrien, Marketing Manager, Health and Disability products of Greater Montreal Financial Services. “I have to commend a lot of the websites because they are quite well designed. Although they provide a lot of information, even basic CI is still a complex product.”

Part of the problem is that there is a lack of information for the consumer, and the issue of preferred rates is rarely discussed. When buying online, customers are offered non-preferred smoker and non-smoker rates.

Mr. Therrien points out that there are a whole myriad of services attached to CI, which consumers should know about. “If I buy a little less or a little more, the premium can change by 15%. What about smoker-status? What if I smoke a pipe or a cigar? Some companies will consider that a non-smoker, and double the rates. That is a major difference!”

As well, buying CI online only allows the consumer to be covered for three to four illnesses, whereas if buying through a broker, a consumer can be covered for more and in the same price range.

Mr.Therrien uses the example of a client looking to buy $90,000 in coverage. He often suggests to them to buy $100,000 in coverage since the client will be covered for more but the premium will usually remain the same. When buying online, however, the client may not be made aware of that.

Guy Giannini, Vice-President of TD Life, stresses that it is not as complicated as some may think. “We’re not trying to deal with the kinds of coverages that the major life insurers try to talk to. We have narrowed it down so it becomes more affordable, and we are concentrating on the three diseases that are the most common in Canada.

Ken Davies, Senior Marketing Consultant at Canada Life, has had experience selling basic term insurance online. He notes that what you typically find online is commodity driven. This suggests that the person buying is looking for relatively small amounts of coverage.

Mr. Davies explains that consumers may not go through an ‘adequate needs analysis’ when buying online. He recognizes that CI online is better than nothing in terms of coverage, but that customers may not be purchasing the correct amount. “Despite the fact they may need $250,000 in coverage, they may only buy $100,000, which is better than nothing, but it is probably not the right number,” he says.

He does not think that CI online will take-off since it is a relatively expensive product. “It is something that is typically not purchased if it is perceived to be expensive,” says Mr. Davies. “I do not think online sales are setting any records, I know that in our experience we certainly received sales, they are good, but I would not say that they are huge.”

Despite Mr. Davies’ hesitation, he recognizes the potential of the websites and admits that if the product is kept simple, the selling of CI online can be done.

“It depends on the product, if you strip it down to the big three; cancer, heart attack and stroke, it can be sold online,” explains Mr. Davies.

Mr.Therrien agrees that there are useful aspects of TD’s and Clarica’s sites, such as the fact that they increase awareness. He acknowledges that the sites allow clients to read a lot of important information carefully.

Same service, price

Jennifer Weir, Director of e-Commerce at Clarica, stresses that online customers get the same service and prices regardless of the medium used. “Our principle is ‘same product, same price,’ whether you buy it through the web or an agent.”

Mr. Giannini seconds that notion, but states that it may cost less to buy CI online than via the phone in the future.

“There is a marketing cost to drive a person to the phone and Internet. The cost to close on the site may be less than the cost to close on the phone, but we haven’t done all the arithmetic yet,” says Mr. Giannini.

TD’s CI product, called the Survivor’s Financial Plan, is located at The plan is for Canadians aged 21-54, and covers cancer, heart attack and stroke, which are the three most common critical illnesses in Canada.

“The concept is that more and more people are being diagnosed with what used to be deadly diseases, but are now surviving. Unlike life insurance that pays a death benefit, critical illness insurance pays you if you survive. That led us to launch a direct product, and when you launch a direct product it is launched online as well,” says Mr. Giannini.

If diagnosed, the customer would receive a living benefit of up to $50,000 that can be used for anything, like additional treatment, job retraining, and to spend time with family during the recovery process. The premiums begin at $12.95 a month and will stay fixed for a term of ten years.

“Today’s households have a new problem. They don’t need $200,000 in coverage, but they do need some help because none of the insurance plans they have in place, fill that gap,” mentions Mr. Giannini.

“Our goal is to provide the product wherever the customer wants to buy it, and online is now an existing regular channel. Up to 50% of our sales come through the Internet, depending on the product,” reveals Mr. Giannini.

The TD CI plan is not yet available in the Atlantic provinces and Quebec. Mr. Giannini attributes this to regulatory issues in P.E.I. and Quebec, and distribution difficulties in Nova Scotia and Newfoundland. However, there are plans to translate the material in French and to make the online plan available to all Canadians.

Clarica’s CI product, located online at, also allows a consumer to complete the entire transaction online and includes immediate approval. As well, Clarica’s site encourages the consumer to contact an agent at any stage of the application process.

The main difference between Clarica and TD’s online CI products is that Clarica covers four critical illnesses (cancer, stroke, heart attack and coronary disease), and offers coverage of up to $75,000.

Mr. Therrien says that most people should not go through the process without proper consultation.

“Going through the application too quickly can be a big, big mistake!” he says. Mr. Therrien stresses that to ensure insurance compaies pay the claim, it is important that they have no surprises. Therefore, it is essential that all the information provided is accurate.