Nearly three-quarters – 74% – of advisers believe that customers will pay more for a life cover policy if the definition of terminal illness is enhanced, research from an insurer found.
A poll of 345 advisers sponsored by Guardian and conducted by Ipipeline revealed advisers felt customers would see the value of the policy feature if there was a better wording for terminal illnesses.
The survey follows Financial Conduct Authority (FCA) research last year looking into terminal illness benefits offered in life insurance policies. The regulator concluded there was scope to offer an enhanced definition, while acknowledging this would come at a cost.
Since launching in 2018, Guardian has provided an enhanced terminal illness definition on its life protection cover. This sits alongside its industry-standard definition, which is available on its life essentials cover, and the provider claims to be the only protection firm in the market offering two options at the point of sale with different terminal illness definitions.
Of the advisers who believed customers would pay more for an enhanced definition, 45% predicted they would pay between 5% and 10% more on a policy.
Some 16% predicted people would be willing to pay 10-25% more, while 4% suggested people would pay 25% more for such a policy.
When asked if they felt confident explaining the difference between an enhanced and industry-standard definition, 90% of advisers said they did. However, 52% thought customers still did not understand the difference.
Jacqui Gillies, marketing and proposition director at Guardian, said: “This research, which we sponsored Ipipeline to conduct, has some important market insights. We’re pleased to see most advisers think customers value the enhanced terminal illness definition and would be willing to pay more for it. That’s good to know as it’s a more expensive definition to offer. We’re also pleased the majority (90%) of advisers said they felt confident explaining the difference between the two definitions on offer. There will always be the more price-conscious customer, who can’t or chooses not to pay more for an enhanced definition. But the most important thing is that advisers can confidently position the difference so their clients can make an informed choice.”
Ian Teague, senior VP and managing director for UK and Europe at Ipipeline, said: “We were pleased to conduct this research for Guardian, tapping into advisers’ insights. It’s great to see that advisers and clients value the choice of terminal illness definitions, with 90% of advisers confident in explaining the differences. We’re always happy to collaborate with product providers to better understand and meet the needs of advisers and their clients.”
Difference at the point of claim
Typically, the standard definition pays out what a policyholder is expected to survive for fewer than 12 months, and confirmation of the life expectancy prognosis is needed for a claim.
With an enhanced definition, policyholders can claim easier if they are diagnosed with a terminal illness. With Guardian’s life protection policy, the provider will pay out if a client is diagnosed with incurable stage 4 cancer, motor neurone disease, Parkinson-Plus syndrome and Creutzfeldt Jakob disease, regardless of their life expectancy.
The provider will also pay out on other illnesses if the policyholder is expected to survive for fewer than 12 months, similar to the industry standard.
Guardian said an enhanced definition made a difference at the point of claim. In its 2023 report, 100% of its life and terminal illness claims were paid on its life protection cover, with a third being paid at the time of the initial claim despite not having a 12-month life expectancy.
The firm said this was because the enhanced definition paid out on “incurable stage 4 cancer regardless of life expectancy” and 93% of terminal illness claims last year were due to cancer.
Shekina is the deputy editor at Mortgage Solutions and commercial editor at Mortgage Solutions and Specialist Lending Solutions. She has nearly eight years of experience in the B2B publishing market, having previously covered the hospitality, retail, pet, accounting and jewellery sectors.
Shekina has worked for Mortgage Solutions and Specialist Lending Solutions for almost five years. Here, she covers the market’s breaking news stories, engages with professionals in the sector, and oversees any commercially agreed content in partnership with mortgage-related companies.
This includes presenting webinars and hosting roundtable discussions on developing themes in the mortgage sector.
She is an NCTJ-trained journalist and was nominated for the Headline Money Awards Mortgage Journalist of the Year in 2021.
In her spare time, Shekina likes to read, travel, listen to music and socialise with friends.
She currently reports on current events in the mortgage market and liaises with financial clients to produce sponsored content.
Follow her on Twitter at @ShekinaMS
