Industry Leader Forum: Assurity Life Insurance Company
Whether you’re looking to supplement your income or replace commissions lost due to health care reform, I believe all insurance distributors should be contacting their clients about critical illness insurance (CI). Whether you market individual, worksite or group insurance, your clients need CI!
Current research shows consumers who understand CI want the coverage. CI sales are dramatically increasing as more and more distributors expand their knowledge of the product and its value, as well as capitalize on increased consumer demand. In fact, I predict CI will one day become as popular as life or disability income insurance in the United States.
For those who aren’t familiar with this product, which is relatively new in the United States, CI insurance pays policyowners a lump sum benefit if they are diagnosed with one of the critical illnesses named in the policy. The funds can be used to pay for anything. Common uses are for medical costs not covered by insurance, such as deductibles, coinsurance, travel to a treatment center or home health care. But the money can also be used for nonmedical expenses such as mortgage or rent payments, other household expenses or child care.
CI coverage was developed because health care advances are helping people live longer and survive illnesses that once were almost always fatal. For example, the five year survival rate for all cancers diagnosed between 1999 and 2005 was 68 percent, up from 50 percent in the mid-1970s, according to the American Cancer Society. Improved medical care has also helped heart attack, stroke and other critical illness survivors live longer.
Today, it’s important to note that a critical illness is more likely to happen than a premature death. The odds of death prior to age 65 for a 25-year-old male are about 19 percent, based on the 2007 Life Mortality Table. In comparison, the same individual has a 24 percent (nonsmoker) or 49 percent (smoker) chance of being struck with cancer, a heart attack or a stroke before age 65, according to a recent CI risk assessment study prepared by Milliman, Inc.
I am not suggesting CI insurance replace life insurance in your portfolios. Life insurance should be the foundation of every financial plan. I would argue, however, that most consumers need both life and CI coverage.
Your fellow insurance professionals are capitalizing on consumers’ increased interest in critical illness insurance. CI sales were exceptional in 2010, according to LIMRA’s annual U.S. CI sales report. At year end 2010, total critical illness sales increased 89 percent over 2009. At Assurity, we have also experienced solid growth in our CI sales.
I think these exceptional U.S. sales results are unmatched in the industry. Two phenomena are driving these recent increases.
1. Higher health insurance deductibles. Consumers are struggling to pay more out-of-pocket for health care expenses. To make matters worse, in 2010 non-medical costs accounted for 61 percent of all costs associated with cancer, according to the National Institutes of Health.
2. Health care reform. Distributors are learning to sell ancillary products to help fill gaps in major medical coverage—and to re-establish their commissions to pre-reform levels.
While these phenomena have spurred CI sales, there are also tremendous opportunities for distributors to market CI as mortgage protection. Statistics confirm the need. According to a 2009 study by Harvard researchers, 62 percent of personal bankruptcies in the United States in 2007 were directly related to health problems, and 79 percent of those filers had health insurance.
Many in the U.S. insurance industry believe CI has been popular in the United Kingdom because of their national health care insurance program. However, most policyholders in the United Kingdom purchased their coverage as mortgage protection.
“Individuals recognize the value of buying enough CI protection to pay for one or two years’ worth of mortgage or rent payments or to pay costs not covered by their health insurance,” said Jesse Slome, executive director of the American Association for Critical Illness Insurance (AACII).
Consumers’ need for CI coverage becomes even more urgent with this fact: As health care costs continue to rise faster than household incomes, patients with a serious medical condition sometimes use credit cards to pay for their care. Of low- and middle-income households with credit card debt, 29 percent used their credit cards to pay off medical expenses, according to a 2007 study by the Annie E. Casey Foundation and other foundations.
An important issue to address is that few Americans understand critical illness insurance. Consumer education is well worth the time commitment. People who understand the concept of CI insurance are receptive to buying the coverage. About 75 percent of full-time employees surveyed who don’t own or have never heard of CI insurance found the product appealing after the features were explained, according to the 2010 MetLife Critical Illness Awareness Study.
The need and desire for CI insurance is great among American workers. More than half of the full-time employees surveyed in the MetLife study said they were worried about how a critical illness could affect their family’s financial well-being, and about two-thirds said they have less than three months’ savings available for a medical emergency.
To provide the education and products consumers need, distributors must develop a deep understanding of CI benefits and the options available from various carriers. Assurity was one of the first U.S. carriers in the market and, as a result, has a wealth of institutional knowledge about the marketplace, extensive training tools, and some of the most competitive and innovative products available. We are very committed to CI insurance and offer it in a variety of ways.
Individual CI: Fully underwritten and simplified individual policies as well as riders for individual term and whole life, as well as personal and simplified disability income insurance policies.
Worksite CI: A worksite policy with simplified and guarantee-to-issue options as well as riders for worksite whole life and hospital indemnity policies.
Your clients need to know about this important product! If you still have doubts, remind yourself that a critical illness is more likely to happen than a premature death! [TWR]