"The majority (90%) of advisers said they felt confident explaining the difference between the two definitions on offer. "
- Jacqui Gillies, marketing and proposition director at Guardian
Almost three quarters of advisers think an enhanced terminal illness definition within a life cover policy is a feature that customers value highly enough to pay more for.
The research findings, sponsored by Guardian and conducted by iPipeline, follow the FCA review last year into terminal illness benefits offered within life insurance policies. One conclusion of the review was that there was scope for the industry to consider offering an enhanced definition. The review also acknowledged that an enhanced definition was likely to come at a greater cost.
What is the difference?
• The standard industry terminal illness definition pays out when a policyholder is expected to survive for less than 12 months. To pay out, these policies need confirmation of the customer’s life expectancy prognosis.
• An enhanced terminal illness definition offers greater opportunity for customers to claim if they’re diagnosed with a terminal illness. Guardian’s Life Protection cover pays out if a customer is diagnosed with incurable stage 4 cancer, motor neurone disease, Parkinson-Plus syndrome and Creutzfeldt Jakob disease, regardless of their life expectancy. It also pays out on other diagnoses if a policyholder is expected to survive for less than 12 months (as per the industry-standard).
The research findings
74% of advisers thought customers would pay more for an enhanced definition. Of those, 45% thought customers would pay between 5-10% more, 35% thought up to 5% more, and 16% thought customers would pay between 10-25% more. A small minority (4%) said customers would pay over 25% more. When advisers were asked if they felt confident explaining the difference between an enhanced and industry-standard definition, 90% said they did. By contrast, more than half (52%) said they thought that customers did not yet understand the difference.
The impact of the difference at claim
The enhanced terminal illness definition is now being proven to have an impact at claim. In its 2023 claims report, Guardian confirmed that 100% of its life and terminal illness claims had been paid on its Life Protection cover. The claims report showed that a third of Guardian’s terminal illness claims in 2023 (5 of 15) were able to be paid at the time of initial claim, despite not yet having a 12-months to live prognosis. This was mainly because the enhanced definition pays out on ‘incurable Stage 4 cancer regardless of life expectancy’ and 93% of Guardian’s terminal illness claims in 2023 were due to cancer.
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 & Europe at iPipeline, added: “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.”
