Author: Nancy Germond 

As the cost of long-term care insurance (LTCI) rises and LTCI carriers leave the market, agents must focus on new ways to protect their clients and build customer loyalty. In 2004, there were 100 long-term care insurers offering LTCI; as of 2020, there were about twelve, according to the National Association of Insurance Commissioners.

Critical illness insurance (CII) or catastrophic illness insurance can help agents smooth revenue lost from LTCI sales and help to meet the challenges of today's aging population. The Critical Illness Insurance Global Market Report 2022 predicts an annual growth rate of CII through 2026 of 11.3%. According to the press release published to announce this report, North America is the “largest region in the CII market in 2021."

Critical Illness Coverage a Big Opportunity for Today's Agents

As Americans age and more meet chronic healthcare challenges such as high blood pressure and diabetes, they often find their current healthcare fails to cover all the costs of critical illnesses.

According to the Federal Reserve in a recent study, 36% of Americans cannot cover a $400 emergency. And in a 2018 study by The Commonwealth Fund, among sick Americans with health insurance, 31% have trouble paying hospital bills and 27% can't always afford their medications. These statistics highlight the need for critical illness insurance.

Failure to manage chronic conditions can quickly escalate into hospitalizations. The recent pandemic has made the search for financial solutions more imperative for many consumers. Some CII policies also now include coverage for COVID conditions.

Sure, you may think it's easy to explain this to people with chronic medical conditions. But what about younger generations who may be healthy? How do you market to them?

Education is key, and it's easy to take a two-pronged approach. Speak to older generations first, then remind them to discuss these issues with their children, nephews, nieces, and those they mentor or coach. To become a trusted insurance adviser, positioning your marketing is important.

A Brief History of CII coverage

The first CII coverage launched in South Africa in 1983 after Dr. Marius Barnard, who pioneered heart transplants, saw the devastating impact of critical illness on his patients. First called “dread disease insurance," CII spread to the United Kingdom, Ireland, Australia and New Zealand. According to one source, CII coverage today “holds its place" alongside national healthcare in these countries.

Conditions first covered were heart attack, cancer, stroke and coronary by-pass surgery. Today, CII policies can cover a host of conditions, from Alzheimer's to organ transplants to severe burns.

Most People Do Not Understand Their Risks

According to LIMRA, an organization that provides advice to the financial services industry, workers offered CII often decline it because they misunderstand the risks they face. They underestimate the chance of a heart attack or cancer, and don't understand the benefits offered by CII.

Your blogs or social media campaigns can highlight these important health challenges, and the likelihood of debilitating illnesses or incidents, to promote the CII product through education.

According to Brett Fulmer, Managing Broker at Newport Beach Insurance Center in California, “You'll feel better as an agent, too, if your client has a major health setback, but you have dollars there to protect them."

Educating the Consumer Sells CII Coverage

Today's consumers are sophisticated. Before any purchase, many consumers utilize search engines, doing their own research before they contact a professional. Of course, this is the “sales funnel," where people research, often online, long before they buy. This is where you want your blog and social media posts to shine with the use of appropriate keywords that draw readers to your posts and onto your website.

Many of your clients will have some information about CII before they find you, but often, they come to you looking for expertise. You can help clients determine some of the factors that can move them from “just looking" to “buyer."

How Does the Policy Pay?

Critical Illness coverage provides lump-sum payments or monthly benefits upon diagnosis. Lump sum benefits can range from $10,000 to $100,000 or more.

How is CII Underwritten?

Some clients can meet a simplified underwriting process after your client answers a series of “yes" or “no" questions. In cases when there are minimal medical issues, some insurers can bind coverage in seven days to a few weeks.

In cases that are more complex or when your high-value clients seek jumbo limits, carriers may require full underwriting, which can include a medical records review, a full medical history and phone interviews. Full underwriting takes longer than simplified. It may take as long as 30 days or more to finalize coverage.

Two Approaches to the Sale of CII Coverage

If your clients come looking for life or health coverage, you can fill that need, then approach them about CII by providing some, “Did you know?" statistics. You may also choose a “lifestyle" approach to less analytical clients, asking them to imagine the difficulties they would face if they or a member of their family suffered a catastrophic illness.

The better you know your customer, the better you can target your sales approach to address their concerns. In either case, your candid approach, and highlighting the affordability of CII coverage, can help your clients choose the CII plan that best suits their unique needs and budget. “And if you're already in the life insurance sales process, CII is a no brainer and meaningful. Disability coverage is so expensive, it's a nice half-step there," according to Fulmer.

Here are two commonly used approaches to selling CII coverage. The statistical approach focuses on the facts surrounding the need for coverage. These include statements such as these.

• Even those with health insurance struggle to pay their medical and other bills when critical illness strikes. According to a recent Harvard University study, 31% of those with health insurance still faced “serious problems" paying their hospital bills.
• A 2019 study found that 66.5% of bankruptcies arose from overwhelming medical expenses. The CII policy can help defray those high medical out-of-pocket expenses.
• Half of home mortgage foreclosures in the U.S. occur due in part to medical issues, according to Physicians for a National Health Program.
• According to GoodRX Health, the out-of-pocket cost to manage heart disease in the U.S. can exceed $2,000 per year. If a heart condition impacts you or your partner, how would that $2,000 impact your annual budget?
• This important coverage can help bridge the sting to your pocketbook of a catastrophic event.
  
   

The other approach is the lifestyle approach, which focuses on the consequences of a critical illness. Maintaining one's lifestyle in the face of a critical illness can be difficult. Here are some of the benefits of CII insurance you can stress to your clients with this lifestyle approach.  

• You can improve and speed up your recovery and quality of life after a critical illness by paying for treatments not traditionally covered by health plans, such as chiropractic, home-health aides, or acupuncture care.
• CII can help pay for home retrofits you may need to help you adjust to life post-illness.
• CII can help you and your family maintain your current lifestyle by allowing you to meet your financial commitments, such as auto payments or educational costs for your children.
  
   

Of course, once you sell the policy, you'll want to stay in touch with your clients with health tips, updates on other coverages and other communications.

The Growing Need for Critical Illness Coverage

As Americans age and medical choices become increasingly important due to growing rates of diabetes, hypertension and cancer, the need for CII coverage grows. Medical insurance does not cover all the associated costs of a critical illness. Even a “Gold Plan" under the Affordable Care Act will only pay 80 percent of medical costs, leaving the critically ill to face many out-of-pocket expenditures. CII coverage can help defray those costs, helping your clients maintain their current lifestyle. A CII plan can help reduce gaps between coverage and co-pays or can act as a standalone plan for healthy young people who do not want to buy medical insurance.

Many Americans face impaired credit ratings and eventual bankruptcy from unpaid medical bills and the associated costs of critical illnesses. Costs for out-of-pocket medical expenses, mortgages, and child and home-health care can overwhelm the critically ill. Critical Illness coverage fills that expensive and often catastrophic gap.

Wide Market Appeal for CII Coverage

From younger buyers to aging couples who face the possibility of critical illness, there is a big market to mine. Your blog posts and social media updates can target families, parents who want to protect their grown children and grandchildren in the event their kids are unprepared for a critical illness, and of course, Millennials and Gen X and Gen Y, who are increasingly diagnosed at younger ages with chronic illnesses like diabetes.

You can also market to employers or associations, where the need for richer benefits only grows. “CII coverage can be an inexpensive value-add benefit to aid in employee retention, according to Fulmer. “It can also help employees protect their benefit dollars and get them back to work more quickly" after a catastrophic illness or event.

More employers offer CII coverage to help their workers meet the challenges of catastrophic illness and help round out their benefits packages. Small employers increasingly seek ways to offer a richer benefits package to candidates to help attract or retain them once on board. Opening the door with CII, your agency can capitalize on this trend.  

Opportunities Await Agents Who Meet the Challenge of a Changing Marketplace

No matter which demographic or which organizations you decide to target, the need for CII coverage and the CII marketplace continues to expand.

As our society ages and healthcare challenges increase, the CII market will continue to grow. CII coverage offers agents high first year and renewal compensation. “CII [revenue] can help bridge times when the [sales] engine's a bit down or getting rebuilt," Fulmer says.

If your agency does not employ licensed healthcare agents, consider bringing in a life agent to supplement your offerings. The more coverage gaps you can fill in house, the less chances that another agent will woo your accounts away from your agency. 

Last Updated: January 27, 2023

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