The coronavirus outbreak has really made people look at the life, health and medical insurance market.
It has opened the eyes of clients about what cover they have and what is in their policies.
Most of the time, coverage doesn’t extend to the issue that clients have or may have later down the line.
This has become a problem in the Middle East, especially in the health and protection market.
Problems in the market
Walter Jopp, chief executive for Zurich Middle East, told International Adviser: “Many people who have life insurance, tend to overlook protecting themselves against critical illness.
“Those individuals who believe that their health or medical insurance will provide adequate cover in the case of critical illness might be caught out.
“Often medical insurance is capped and insufficient when considering the cost of a serious illness.”
According to the Nexus Group, the maximum cover that is available in the region is $2m (£1.61m, €1.81m) from a single provider.
However, the average cover chosen by clients over the years is around $100,000; limiting factors include “the relatively high cost of cover” and “pre-existing medical conditions limit the access to critical illness cover”.
Adnan Lateef, interim general manager for Middle East and Africa at Friends Provident International, said: “Unfortunately, critical illness cover is often misunderstood as providing protection similar to medical health cover or medical insurance.
“This misconception has resulted in many people opting to stick with their company’s medical insurance scheme, and not explore or understand the need for critical illness cover and the additional benefits and security that it can provide.”
How does it work
So, what does a critical illness policy actually do to help customers?
A lump sum payment is made direct to the customer on diagnosis of one of the specified illnesses or disabilities covered under the policy.
The funds can be used to supplement gaps in their medical insurance.
The customer can also use the claim proceeds to help cover the cost of daily living and ongoing financial commitments, enabling them to focus on their immediate treatments and long-term recovery.
Vulnerability
Clients not opting for critical illness cover may be left defenceless if the worst strikes, and they may not be able to cope financially if out of work and having to fork out for medical bills.
“When considering critical illness, individuals often forget that during the course of treatment, they are not able to earn an income,” Zurich’s Jopp said. “They need to cover the costs of treatment plus living expenses; such as rent or mortgage, education, bills and other costs associated with supporting their family.
“Insufficient cover is also a key issue. Zurich reports that 93% of critical illness claimants were insured for $250,000 or less.
“The climbing costs of treatment and associated expenses without an income for an extended period of time puts additional pressure on the insured.”
Tarun Khanna, chief executive of Nexus Group, said there are several reasons why people are not choosing to get critical illness cover, leaving them vunerable.
These include:
- Lack of understanding of the nature of critical illness cover, such as an income replacement benefit;
- Lack of trust in the providers with regards to the fairness of the claims settlement;
- Misconceptions that medical insurance is enough to take care of the expenses involved in treating a critical condition; and
- Affordability of adequate cover.
Future of policies
The UAE market is flooded with insurance products, but what do advisers want from critical illness policies?
Khanna said: “One of the providers recently introduced ‘cancer only cover’, when the client is not eligible for full-fledged critical illness cover.
“This is a welcome development. Specific exclusions such as ‘breast cancer’ for female lives with adverse family history, are being offered.”
These “flexible and innovative products need to be introduced in the market”, he added.
But, Lateef said that “historically”, a critical illness policy “would only cover a small number of catastrophic medical emergencies”, such as cardiac arrest, stroke and cancer.
“Today, policies offer more extensive coverage across a range of critical illnesses and disabilities that vary in severity.”
Tackling the problem
The critical illness market will not be bolstered unless there is an increase in knowledge about using the cover as a wealth management or advice tool.
This must come in the form of a campaign.
So, who should take the lead?
Khanna said: “Primary responsibility is with the distributors to promote market awareness.
“Providers should make the critical illness cover affordable, based on the claim experience, by enhancing the product offering.
“Regulators and the government could contribute by way of public education and incentives to the employers, to make the critical illness cover mandatory, just like medical insurance.”
But, FPI’s Lateef said that both “insurance companies along with the IFAs should work towards educating customers on this gap in protection cover”.
Hitting the right spot
The campaign needs to be targeted and aimed at the appropriate audience in a way that grabs people’s attention.
Jopp added: “Increasing community awareness around the importance of life insurance and critical illness cover is the first essential step to empowering customers to take preventative action for safeguarding themselves and their family.
“The old adage ‘knowledge is power’ has never been more true. Once you understand the risks, you can plan for them.
“Advisers understand that the greatest barrier to taking out life insurance is lack of awareness around life and health risks.
“Understandably, most people avoid thinking about their own passing or the chances of becoming a victim of critical illness.”
Making the effort
Nexus Group’s Khanna said that the firm is carrying out social media campaigns on Twitter, Linkedin and Facebook to promote the “features and benefits of having adequate” cover.
Advisers have been “encouraged to conduct awareness seminars for small groups at their work place and promote the cover actively”.
“Nexus conducts regular client seminars on topics such as life insurance, critical illness, wealth management & estate planning topics for individuals and corporates,” he said.
This sort of action will go a long way to tackling the problem.
Lateef added: “Today, we are witnessing how critical illness cover is becoming of utmost importance.
“Life changes. Be prepared. Be protected.”