In the first part of this blog series, we presented the concepts of Critical Illness (CI) and Disability insurance and explained their various design options. In the second part, it was shown that offering a combination of CI and Disability insurance makes sense with an increased coverage potential, providing optimal cover for insureds. Building on this, we would now like to outline some product ideas that merge CI and Disability components in a sensible way that could enriches an insurance company’s range of products. Here are four ideas to help insurers grow:
Use CI insurance to bridge the deferred period
One product idea is based on the consideration that it is unfavourable for policyholders to receive a benefit after diagnosis of a serious illness only after the deferred period for disability coverage has elapsed. For this reason, if the CI criteria are met, this product immediately makes the regular payments that the insured persons can expect after the deferred period of the Disability insurance. The product can be kept attractive in terms of price, as the deferred period of, for example, six months does not cause premiums to rise excessively. At the same time, in the event of one or more severe diagnoses, insured persons can also count on a benefit from the insurer during the first six months of the year.
Consider Essential Abilities insurance with a CI component
In recent years, another model has successfully established itself in the German market in which CI is regularly a key component. Essential Abilities insurance is a successful product in Germany and is often offered as a cheaper alternative to occupational disability insurance. Essential abilities are defined as essential bodily functions, such as sight, hearing and speaking, but also running, standing or sitting. The product includes other essential abilities that need to be defined individually, similar to the illnesses covered by CI insurance.
In the event of a claim, however, insurance benefits are paid on a monthly basis in the same way as Disability Income insurance. In this context, an additional CI component with the typically covered illnesses can be a sensible addition to the benefits of Essential Abilities insurance. In addition, this product usually pays in cases where long-term care is necessary in order to be able to financially cover the most serious consequences of illnesses or injuries.
Put CI and Disability benefit triggers in conjunction
An insurance product can be created that is characterised by the fact that the policy triggers only if the conditions of both Disability insurance and CI insurance – which can be determined individually – are met cumulatively (in a conjunction of benefit triggers).
This product is therefore much more restrictive than traditional Disability insurance, meaning that claims arise less frequently. As a result, significantly lower premiums can be offered. It should be noted that claims are usually easier to process compared to a pure Disability product, as complex claims are likely to occur less frequently due to the exclusion of mental and muscular causes, for example.
Compared to a pure CI product, the additional condition – the existence of a disability – can ensure that only serious illnesses are covered. This limitation seems particularly relevant in view of the steady progress in medicine, which is increasingly making it possible to diagnose diseases at an early stage.
This product variant therefore ensures that CI insurance benefits with mild disease progression are avoided in the future, so that more attractive premiums can be offered.
Combine lump-sum benefits into one policy
Another idea is a product design based on the notion of accelerated CI benefits. Among other things, this offers the advantage that premiums can be offered at lower prices than would normally be possible with separate sales of death and CI insurance policies. This is due to the overlap of benefit triggers.
For example, a heart attack can be fatal. In the case of an accelerated CI benefit, it would therefore be unnecessary to charge the insured both the premium for cover for heart attacks and the premium for cover in the event of death. We now want to expand the product combination by adding the disability benefit trigger as a lump-sum payment to the CI and death cover.
The Disability benefit is implemented as an accelerated benefit, so that premiums can also be reduced here by overlapping events. As with other CI and Disability products, the benefit triggers can be adjusted in a variety of ways, as mentioned in the first part of the blog series.
At Gen Re, we are delighted to work with our clients to develop appropriate insurance products for them and contribute to a product landscape that offers even more optimised solutions for consumers. If you are interested in implementing one of the products outlined above or another insurance product, please do not hesitate to contact your Account Executive.