"Take-up of critical illness cover among UK adults is low relative to need. Providers must put renewed effort into improving consumer understanding and engagement."
Sarah Hitchcock, Associate Consultant – Financial Services
Despite the recent strong growth in standalone policies, most critical illness insurance continues to be sold as a rider benefit to term life insurance. However, cost-of-living pressures, depressed mortgage activity and shrinking supply have adversely impacted demand for both individual term life and critical illness insurance since 2019. The smaller standalone market is experiencing rising demand, but this has not been sufficient to fully offset lower rider benefit sales.
Poor consumer understanding, product complexity, difficulties accessing advice, and concerns about affordability are the main barriers to growth. Tackling these will be challenging, but worth the effort to prompt into action the 29% of UK adults who don’t currently have CI cover but believe they are likely to get it in the future.
Another key industry objective continues to be widening the product’s appeal beyond its core market of mortgage holders, by significantly growing take-up among private renters. Nearly a quarter of parents with children under 19 live in the private rented sector, and many of them are interested in the product. Converting this interest into action requires specific messaging and digital marketing to demonstrate relevance, along with simplified and integrated solutions, and easier access to sources of advice and guidance.
This Report examines the UK market for individual critical illness cover.
Critical illness cover is a long-term insurance policy designed to pay a lump sum to the policyholder on the diagnosis of certain illnesses and medical conditions of a specific severity, such as heart attack, stroke and cancer. It can be written on a single or joint life basis, and on the basis of level, increasing or decreasing cover.
Critical illness cover can be bought on its own (ie as a standalone policy) or as an add-on or ‘rider’ to other insurance, most commonly term life insurance (which pays out a lump sum if the policyholder dies or is diagnosed with a terminal illness within a set term). It can also be added to an income protection policy (which is designed to replace a proportion of lost earnings in the event the policyholder is unable to work due to sickness, accident or injury).
Premiums are based primarily on age and health, the sum insured and the policy term. The older the person or the longer the policy term, the higher the premium will generally be.
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