Why CII

Hank George FALU, CLU, FLMI
Broker World, August 2002

First off, my apologies for not doing a second teleunderwriting essay as promised in June. I decided critical illness insurance (CII) just should not wait. So look for teleunderwriting part two next time.

Just two days before being inspired to pen this overdue essay, this underwriter was addressing an audience of peers on 26th and Madison.

“How many of you know what critical illness insurance is?” A scattering of hands, slowly ascending, as if to say,

“Well, maybe…a little.”

My next question, “What would you say if I told you it was destined for stardom? To be America’s next big insurance product?” A wall of silence, less disconcerting only for the generalized non-defensive body language! Like I said, this essay is just a bit overdue.

Let’s say you’re advised by your physician to have a coronary angioplasty. No emergency—not yet, anyway—but the time has come to widen the old lumen, to turn a phrase. Would just any hospital suffice, as it might for, say, a hemorrhoidectomy? Or, would you be more selective, given the organ involved?

What if you’d just read a paper in a prominent cardiology journal documenting wide hospital-to-hospital variation in mortality associated with angioplasty procedures? As in zero percent mortality in hospital A versus 9.1 percent in hospital B!

Or, what if your last esophagoscopy (ugh) for a Barrett turned up early — and apparently resectable—adenocarcinoma? Would you prefer hospital A (with four percent surgical mortality in this procedure) or hospital B (with one death in every 6.5 patients having said surgery)?

Think about it…which hospital would you choose with your life on the line? The operative word, of course, is “choose.” To “choose” in this context means having the bucks to make the call…and avoid being involuntarily sent (triaged? sentenced? damned?) to hospital B.

For most of us, the necessary dollars to make an informed choice will only be available if we have critical illness insurance.

And then there are those experimental therapies; you know, the ones that sometimes cure the “incurable” (I know a wonderful lady and beloved friend who had stage IV ovarian cancer 11 years ago, which just happens to be about four times one’s life expectancy with this disease; it does happen).

For the record, experimental therapies usually have three things in common: they require travel (with an extended stay away from home), they are quite costly, and (need we say) they are rarely if ever covered by garden-variety health insurance.

Once again, critical illness insurance to the rescue…and we haven’t even begun to talk about those other expenses which inevitably accrue from critical illness and unmask previously unappreciated shortcomings in your DI coverage.

Outlast your dread disease (eight of ten survive life-threatening illness), then wish you hadn’t…when you see the financial mess! Not exactly The American Dream.

Now ask again why I say that critical illness insurance is a hand in glove fit in most clients’ portfolios.

What a refreshing experience for the broker: no complex formulas to understand and explain. When you think about it, CI is probably the least complex insurance product, for the customer anyway, this side of mortgage term!

It covers precisely those conditions—cancer, heart attack, stroke—for which we are at greatest risk of experiencing catastrophic illness. True, most carriers are browbeaten by marketing to embellish their product with another dozen (in one case, they tell me, over 100) additional covered dread diseases and critical life events. However, the big three are the ones that really matter to most clients. (Let the record show that this underwriter has a hard time visualizing how multiple sclerosis fits within the common sense risk boundaries of critical illness!).

Critical illness insurance:

• Fills a clear, present, and easily visualized void in anyone’s otherwise picture-perfect portfolio. As in, funding the choice to live, not die!
• Fits every distribution mode, from worksite on up.
• Has inherent appeal to blue collar customers.
• Might pave our way back to our long-neglected middle market.

Will CI become our most coveted twenty-first century employee benefit? Will cutting-edge employers use it to lure top talent? And what of those who fall through the cracks in conventional DI, such as over-the-road truckers? Is critical illness insurance not ideal for them? The risk aspect of critical illness insurance offers a novel challenge to bored underwriters, if only because the contract defines the risk!

What is and what isn’t cancer?

If one’s troponin T is elevated, does that make the event a myocardial infarction?

What distinguishes a true stroke from a “mere” reversible ischemic neurologic deficit (a category between a TIA and a true stroke)?

Call me crazy (others have), but—golly—I just love this stuff! Having already chaired the faculty for two (sell-out) Society of Actuaries’ seminars on critical illness insurance, and having contributed a paper to a four-article series in ON THE RISK (which delved into various aspects of CI coverage), I guess you could say I’m hooked. No, make that convinced. Okay, sold.

That’s why I agreed to be a main platform speaker at the World Critical Illness Conference next January in Vancouver (visit www.criticalinsurance.ca and see why you don’t want to miss this conference).

That’s why I am prodding the Society of Actuaries to do a critical illness insurance symposium next June, somewhere in North America.

That’s why I put the most compelling topic in twenty-first century risk management—teleunderwriting—on hold…just to write this essay.

Word to the wise: don’t listen to those who say it won’t work. Take a real close look at critical illness insurance.