IFAs champion evolution rather than revolution as the key to the CIC market

A representative sample of over 400 IFAs was asked during November 2003 for their views on the future of the critical illness market and possible next generation products.

Legal & General commissioned the research in response to the widely held view that today’s critical illness market may not be sustainable in the longer term due to the threat from medical advances and to ensure that the needs of IFAs are included in future product developments.

IFAs stressed an overwhelming desire for new products to be simple, flexible and compliant with the ABI statement of best practice including common definitions to promote a clearly defined market norm and to enable straightforward product comparisons between providers.

IFAs expressed strong opinions on possible next generation products being suggested within the industry. However while the future of the critical illness market proved to be a hot topic which IFAs were keen to discuss, there was little immediate pressure for radical change in product design.

While just under half of the IFAs questioned currently offer their customers a choice between reviewable and guaranteed premium products, the vast majority ultimately recommend guaranteed products and do not believe that premiums will become unaffordable in the short term.

When asked to consider what current alternatives they would be prepared to recommend if today’s guaranteed premium products were to become unaffordable, IFA views were polarised. Approximately half said they would recommend reviewable premium CIC while the rest would offer alternative products including income protection.

When questioned on possible new product structures, IFAs expressed an overwhelming preference for guaranteed products even if this was at the cost of tighter definitions. The overall attractiveness of renewable premium products however increased the longer the time between renewal periods. IFAs expressed concerns over reviewable definitions.

Graham Newitt, Managing Director Intermediary Solutions said, "This research reinforces the fact that IFAs still favour today’s guaranteed CIC products and believe their customers are prepared to pay for guarantees. While the findings have suggested IFAs feel the market is able to cope with the current short term pressures, they are clearly well aware of the longer term issues facing the market. This research will ensure that IFAs’ views will be an important influence when, at the appropriate time, new products are developed that meet the needs of insurer, reinsurer, intermediary and customer."

Legal & General has donated £2,000 to a cancer charity as a token of appreciation for the participation of IFAs in its research project.