Fewer insurers, fuller policies: 25 years of market transformation in critical illness

Twenty-five years is not a long period of time, but in financial services, specifically the critical illness world, it is comparable to contrasting today’s world with post-World War Two Britain.

Today, only 11 insurers offer some form of critical illness insurance, with others white-labelling either Aviva or Legal & General plans. If we voyage back to the year 2000, we would find 30 insurers in the market provided intermediated or D2C plans.

Conversely, over this period the numbers of conditions included within plans has risen exponentially. Of course, counting condition numbers is a mug’s game when it comes to assessing worth and value, but looking at bare numbers does serve to highlight the major changes that the last 25 years has produced.

Additional payment conditions did not emerge until June 2003 when Skandia added less advanced cancer of the breast and prostate. Since then, the numbers have steadily increased and, because a claim does not reduce the insured sum, it forms an important and under-rated component of quality plans.

It is commonplace today for insurers to offer the option of a core or a comprehensive plan. Back in 2000, Zurich offered a core plan with seven 100% conditions and the option to increase coverage by adding an additional 20 100% conditions.

Children’s critical illness was far from the cleverly designed versions currently available today. Aviva, then trading as Norwich Union, did not even offer children’s cover. With L&G, it was a paid-for option paying the lower of £15,000 or 50% of the parent’s sum insured. The plan started 30 days after birth, finished on the child’s 18th birthday and a 28-day minimum survival period applied.

Zurich’s offering was even less appealing, commencing on the child’s first birthday, ending on their 18th and paying a maximum £15,000. This compares to today’s optional child cover offering a level sum insured between £10,000 and £100,000 starting in utero, covering congenital conditions and lasting until the 23rd birthday.

Also, additional health benefits did not exist, nor did enhanced age-based payments. Claims data was not made available and the ABI Statement of Best Practice was only a year into its infancy.

Table one below highlights the details of the three current insurers who were also around in 2000, highlighting the substantial improvements over this period.

While there are far fewer players today, on the whole policies are more comprehensive and offer additional health benefits that simply did not exist at the turn of the century. However, as a result, the market is far more complex and harder for advisers to navigate, especially if they do not use a robust comparison system.