Critical illness insurance: forging new and expanding territoryArticle added by Debie Knowles on September 15, 2011
Debie Knowles

Debie Knowles

League City, TX

Joined: October 13, 2006

Currently, the main hindrance to CI sales in the U.S. is simply unfamiliarity. What it is? What does it do for the client? How do you sell it?

Critical illness insurance isn’t new in countries with some form of socialized health care, but it’s a relatively new concept here in the United States. Ask most people if they’ve ever considered purchasing critical illness insurance and the curious gleam in their eye often glazes over into semi-bewilderment. Moreover, ask many brokers and agents if they’ve considered selling critical illness insurance and you may incur that same response.

British Commonwealth countries like Canada, Australia and South Africa have had CI insurance since the 1980s1, and new concept not withstanding, critical illness products have recently immigrated and found a permanent home in the United States.

As cost-sensitive Americans, whether individuals or employers, are seeking ways to defray mounting medical expenses, more than ever they may find that supplemental health products can provide solutions. Likewise, as more brokers and agents are forging the territory of this ever changing economic landscape, they may find that supplemental health products, like critical illness insurance, have a place in their portfolio.

Currently, the main hindrance to CI sales in the U.S. is simply unfamiliarity. What it is? What does it do for the client? How do you sell it?

The first thing to understand is that a critical illness affects more than just the body. In fact, world-renowned heart surgeon Dr. Marius Barnard originally developed critical illness insurance after he realized that the recovery of many of his patients was being hindered by the emotional strain of struggling to pay medical bills. According to Dr. Barnard, you need critical illness insurance, “Not because you’re going to die, but because you’re going to live.”2

With this bit of insight, the concept of CI insurance is easy to understand. CI insurance solves a problem that sneaks up and grabs its victims by the financial throat. According to the American Heart Association, approximately every 25 seconds, someone in the U.S. suffers a coronary event or a heart attack, while on an average of every 40 seconds, someone suffers a stroke.

Cancer statistics are just as startling. Almost 50 percent of men will be diagnosed with some form of cancer during their lifetime, and the lifetime risk of cancer for women is higher than one in three.3

Sadly, most people are unaware until it’s too late that an illness of this magnitude creates a host of expenses they never expected. For example, in the case of a heart attack or stroke, if a patient has to take a leave from work to undergo treatment or if someone has to stay home and tend to a recovering patient, an unpaid leave could leave a gaping hole in the household budget.

Then there’s the cost of the seemingly mundane day-to-day expenses that can quickly add up, such as transportation to and lodging near hospitals or specialists’ offices, in addition to parking or perhaps child care or pet boarding. Adding to this, in some instances, the recovering person may temporarily need help with ordinary household chores. The list could go on and on.
In this light, CI insurance can be thought of as post illness financial protection. A CI product pays a lump sum upon diagnosis of a covered illness or condition and the insured may use the money at their discretion. The plans vary in the conditions they cover. Almost all insure against heart attack, heart or bypass surgery, cancer, stroke, kidney failure and organ transplant, but some also include coma or even paralysis.

The payment can be used for such needs as replacing the lost income from an unpaid leave from work or to cover any of the expenses previously mentioned, in addition to out-of-pocket medical expenses like deductibles and copayments. If the whole amount isn’t needed for medical care, it could even be used to take a vacation or cruise to celebrate the recovery.

For health insurance agents and brokers whose commissions have decreased over the last few years, CI plans can offer new sales opportunities. Agent Sales Journal’s 2011 Health Market Study stated that agents are earning less income, facing new challenges in the industry, and for the first time since the ASJ study began in 2007, agents no longer feel optimistic about the future.4

Producers who have found their niche with a particular product now find sales declining. Because they have specialized in one or two areas, their niche has become a rut. When facing a decline in one area, especially when the decline impacts income, it’s important to seek out new opportunities. Adding supplemental products like CI insurance to one’s portfolio can offset decreasing sales elsewhere.

So how do you sell it? First, it is crucial to establish the need for the product, and when examining the impact of major illnesses on American families today, the need becomes easy to see.

While CI statistics are numerous and grim, there is good news. Due to continual advances in medical science and technology, 86 percent of people hospitalized for heart attacks now survive.5 Similarly, 80 percent of stroke patients survive their initial event.

Unfortunately, however, the costs for the survivor’s care can be very expensive. Therefore, it is important to take into consideration that the victims of a critical illness are often husbands and wives or single parents who are the breadwinners of their families, and any interruption in income or mounting unexpected expenses can be detrimental to their financial well-being.

A 2007 study on medical bills and personal bankruptcy, conducted at Harvard University, discovered that 62 percent of personal bankruptcies in the United States in 2007 were the result of illness and medical bills. Of the families involved, 78 percent did have medical insurance at the onset of their critical illness.6 In spite of their insurance, these families reported an average of $17,749 in out-of-pocket medical expenses.7 It’s tragic to think that a shortfall of just under $18,000 forced these families into bankruptcy.
Discussing such harsh facts with a client may be difficult but necessary. They are not scare tactics, they are prepare tactics. Another consideration is that families with annual incomes in the $200,000 to $250,000 range often are small business owners. The out-of-pocket expenses incurred during a critical illness might threaten not only the patient’s family but also his or her business.

There is a growing need for CI insurance in the American market. For clients, preparation for unanticipated expenses caused by medical issues can make all the difference for financial survival. For agents and brokers, CI insurance can be the product to help recover lost commissions and again, make all the difference for financial survival. For both, a little education can go a long way towards embracing a more stable future no matter what the economic climate may bring.

1 “The Marketing of Critical Illness Insurance.” Münchener Rück, Munich Re Group, May 2000. www.munichre.com

2 Clinical Research Study. Medical Bankruptcy in the United States, 2007: Results of a National Study. Eds. David U. Himmelstein, MD, et al 2007. Harvard University, 16 Mar 2011. hp.org/new_bankruptcy_study/Bankruptcy-2009.pdf

3 American Cancer Society, Cancer Facts and Figures 2010

4 Agent Sales Journal, “The Brave New World of Health Insurance.” Heather Trese. 6 June 2011, www.asjonline.com/Issues/2011/6/Pages/Brave-New-World.aspx

5 Essential Benefits, “Why do I need critical illness insurance?” 2 Feb. 2011, www.essentialbenefits.ca

6 Clinical Research Study. Medical Bankruptcy in the United States, 2007: Results of a National Study. Eds. David U. Himmelstein, MD, et al 2007. Harvard University, 16 Mar 2011. hp.org/new_bankruptcy_study/Bankruptcy-2009.pdf

7 Bloomberg Businessweek “Study Links Medical Costs and Personal Bankruptcy.” 4 Jun 2009. Web 3 Mar 2011, www.businessweek.com


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