Sean Long: “Critical Illness Insurance Is Expensive, But It Works”
The only thing that has truly changed in the critical illness market over the years is price.
So says Sean Long, an insurance consultant from Calgary, Alberta, who believes the cost has been affected in a very specific way.
"The cost has not been affected by claims. What the cost has been affected by is a return on capital and a return on investments," he says, and brokers are to blame.
"Agents are doing a better and better job of showing the product off, but what they're not doing is showing how essential the product is," says Long. "Banks do it better. They may not be selling insurance. But, when I just did my mortgage, they made sure to give me a brochure that outlined disability, critical illness and how essential both would be for my new mortgage package. When we as agents show [critical illness] off, we rarely say how essential it really is."
Long believes that brokers should characterize critical illness insurance as paycheque insurance because with a critical illness diagnosis, suddenly a person is unable to work, and without a paycheque on a regular basis, they can no longer pay their bills or their mortgage on top of any medical expenses they will likely incur. However, with the lump sum proceeds provided by a critical illness policy, Long says the insured can guarantee their paycheque for at least five years as long as they take a 2 per cent pay cut in the form of the premiums they will be paying.
"The most important thing to everybody is their paycheques," says Long. "Their ability to get paid for their work so there's money to pay everything and you have the ability to insure those paycheques."
Critical illness insurance is more important than life insurance because you're likely to get a critical illness before you leave this life. If you're 38, your life expectancy is 81 years, but your chances of developing a critical illness before you're 65 years old are 35 per cent, and with the same mortality to age 81, your chances of a critical illness increase to 65 per cent or 70 per cent.
"If your parents have lived in their home for 30 years, ask them how many houses have burned down on their street in that time," says Long. "Then, ask them how many people acquired a critical illness, such as a heart attack, cancer or a stroke, in that same time period. If you ask me, it's probably a lot more and yet, everyone on that street bought their home insurance, didn't they?"
It boggles Long's mind that everyone buys insurance for things least likely to happen but hesitate when it comes to buying insurance for things that are almost guaranteed to afflict them.
"Brokers need to realize that they're not in the selling business, they're in the education business and when they put the right questions to people, those people will figure out the answers, but nobody likes the cost," Long explains.
This is why in his briefcase he carries a bottle of Buckley's Cough Syrup. Everyone knows the motto of Buckley's is, "It tastes awful. And it works," and this is how he frames critical illness insurance.
"Yeah, critical illness," says Long. "It's expensive, but it works and selling it is all in how you present it."
The fact the cost of critical illness has gone up is not because of faulty claims, but rather because of the return of investment capital, which has affected all of the products.
Long also thinks that the product itself has become somewhat absurd in the number of illnesses it covers. Beyond the ten major illnesses, such as cancer or stroke, there's very little coverage for the other ailments.
"The rest have us covering the chances of one in whatever million it is," he says. "If you stick to covering the ten basic illnesses, you're fine. The problem is, when you go beyond the ten, it's not the cost, but it's the fact the insurance provider must underwrite for them, so I believe in a more simplified product."
To make critical illness more affordable, Long suggests purchasing smaller amounts of coverage and researching the claim stats from companies like Munich Re to find out the likelihood of being diagnosed with certain illnesses and only getting coverage for those illnesses that are diagnosed and claimed for most often.
"Critical illness doesn't solve anything," says Long. "It can't reverse a heart attack or stroke, but it can give you the financial ability to deal with them, which is what you want anyway."