CIExpert ‘Critical Thinking’ report reveals changing drivers for critical illness cover

The current needs of consumers have shifted significantly, changing the primary drivers for taking critical illness cover both now and in the future, the new CIExpert ‘Critical Thinking Report’ has revealed.

CIExpert’s ‘Critical Thinking Report 2024’ – sponsored by Guardian and HSBC Life – was based on the views and experiences of 5,000 consumers and analysed by generation, alongside insights from more than 300 advisers.

CIExpert called on the industry to acknowledge the challenges and opportunities uncovered in the research, and focus on using the insights to evolve critical illness cover (CIC) into a mainstream product.

According to the report, there was a lack of awareness among consumers which deterred them from buying the product.

For example, 26% said they did not have a policy because they did not have a mortgage, while others were concerned about the cost of using an adviser, with 32% believing they would be charged for doing so.

The impact of pressures on the NHS emerged as a concern among those who have, or have had, a CIC policy; fears of ill-health (20%) and cancer (18%) were the key drivers for their purchase, as was having a child (20%). 

However, 15% stated that it was down to concerns over the NHS’ ability to treat them if they became seriously unwell – a driver that is likely to grow in the coming years. 

When asked to anticipate what they would use a future claims payout for, more than a fifth (22%) said they would use it for private medical treatment.

Fewer than one in five (19%) consumers would use a CIC claim to pay off their mortgage, but the Critical Thinking Report found that most adviser discussions about CIC arose from an initial mortgage-related conversation, and advisers’ main selling point was to pay off the mortgage.

Alan Lakey, director at CIExpert, said: “The insights in the report are thought-provoking with some particularly surprising aspects that emphasise the scale of the challenges that we face as an industry.

“Yet should we choose to ‘grasp the nettle’ there are some tremendous opportunities for us to pursue that could evoke dramatic change.

“For example, we have identified a mismatch between consumer motivations and what the industry communicates as the key benefits of having a CIC policy. 

“Consumer needs are changing particularly amongst younger generations who have a far higher proportion of renters and a greater focus on their health.”

He added: “As an industry, we have become heavily focused on aligning CIC with paying off the mortgage but this study highlights that it isn’t the prime driver for consumers.

“In the past 10 years, we have seen tremendous improvements in the quality of CIC products being developed but we are clearly failing to communicate some of the new features that have evolved, such as additional payment conditions and added value services.

“With further product evolution, there is an opportunity to change the narrative and reposition the product to address a younger generation, whose fear of being able to rely on the state for their health now and in the future is a real and profound need.

“The findings of this report could just be the foundation of a revolution in CIC that inspires a new vision amongst our product designers and marketers to respond to evolving consumer needs. 

“As the Daily Mail’s Wealth and Personal Finance editor, Jeff Prestridge, remarks in the opening of our report – ‘it is time for CIC to be promoted as a vital cog in the financial armoury available to all households. With more imagination, it can become as mainstream as life insurance’.”

The report found a significant lack of consumer awareness about critical illness cover, including numerous misconceptions, such as not knowing if adviser charge for advice (49%), or being convinced they did indeed charge a fee (63%).

When made aware that advisers do not charge for advice, have access to better quality products, and have access to research tools to help get the best quality policies – four in 10 said they were more likely to consider using an adviser for CIC in the future. 

Furthermore, while 85% of consumers have not taken advice for CIC, 47% said they would consider it, rising among younger people (62% of Gen Z and 57% Millennials).

Mitchell Barker, head of product and chief distribution officer at HSBC Life Ltd, said: “CIExpert’s report shows conclusively that the industry needs to work harder to communicate how critical illness policies have evolved to meet customer needs.

“Value-Added Benefits will continue to be a major area of industry innovation and will drive increased customer engagement throughout the lifetime of the CI policy.”

Rachael Welsh, head of marketing at Guardian, concluded: “We’re proud to support this powerful research.

“It not only highlights the challenges we face as an industry but also helps us find a solution to grow the critical illness market.

“At Guardian, we believe that critical illness cover is an important part of a protection plan, for people of all ages.

“It’s more than just debt protection; it safeguards a customer’s lifestyle, and, in some cases, it can help to pay for additional treatment or support. 

“For me, the findings show we need to change how we talk about critical illness cover in the industry, making sure it aligns with what customers truly value.”