World CI conference update: Industry needs to focus on training

(April 11, 2005) While the cost of medical treatment is largely defrayed by provincial health insurance, losing the ability to earn an income can be devastating. Most people are one major illness away from bankruptcy.

Yet according to critical illness insurance training expert and independent broker Sean Long, most people remain in the dark about critical illness insurance.

“Twenty-five million Canadians have never heard of CI,” he told delegates last week at the World Critical Illness Insurance Conference in Toronto. “Isn’t that amazing? Their fault or ours?”

Long says the industry has no-one to blame but itself.

He says there is often a lack of passion among the training staff employed by the insurers. Typically, they will know their own company’s product offering, but lack a broader understanding of the CI industry.

“Let’s cut their salary down to $10,000 a year and put them on a commission, with their income based on the success of their agents,” he suggests. “Hey, it works for us!”

One of the key problems with the current training regimen is that companies approach CI in the same manner as life insurance. Long says CI is far more complex than life, largely due to definitions. It’s far easier to define the qualifications for a life insurance payout, for example.

“It’s not the same; the training is not the same. It’s a lot more intense and you have to know what is going on all around you.”

In addition, insurers have failed to arrive at a conclusive set of definitions for the illnesses they cover. What one company considers as a qualified heart attack, for example, another may not. This has led to what Long calls a “definition war” — a battle which has benefited no-one.

Rather than compete over their definitions of what constitutes a critical illness, Long says the insurance industry needs to hire the top experts in each field and have them draw up the definitions.

Long says most companies are spending far too much of their marketing budget on events, rather than training their agents, questioning the benefits of a day of golf over proper education.

Across all lines of CI policies, Long identifies a trend where a small number of firms own a massive portion of the market. This trend is most pronounced among T-100 policies, where the top three firms hold 84% of the market.

But market share alone does not tell the whole story.

“I look at the Sun Life figures all the way across [the various markets], how good they are. They’re number one,” he said. “Then I add up all the figures and divide them by 4,200 agents and what I get is less than eight sales per agent annually.”

In Canada, the consumer is hooked on guaranteed rates, but there only one re-insurer offering that option. All the others demand periodic rate reviews.

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Long suggests a fair policy might offer a guaranteed rate for 10 years, after which the insurer has the right to rate increases to a maximum of 20 or 25% for the life of the insured.

“Do you really think any insurance company is going to raise their rates to the maximum 25% at the end of the 10 year period?” asks Long. “No! Why? The sick will stay and the healthy will leave.”

Rates have been increasing due to better diagnostic technologies. It’s easiest to diagnose a heart attack, for example, so they are more frequently detected and claims are submitted more often.

“Re-insurers don’t want all that risk. They want something to protect themselves,” Long says.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com

(04/11/05)

Steven Lamb