The first critical illness coverage was 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," the idea spread to the United Kingdom, Ireland, Australia and New Zealand and holds its place alongside universal health care in these countries.

At first, the conditions it covered were heart attacks, cancer, stroke and coronary bypass surgery. Today, critical illness policies can cover a host of conditions, from Alzheimer's to organ transplants to severe burns.

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. Critical illness insurance, also known as catastrophic illness insurance, can help agents smooth revenue lost from LTCi sales and help to meet the challenges of today's aging population.

In 2004, 100 insurers offered LTCi. As of 2020, there were about 12, according to the National Association of Insurance Commissioners. Meanwhile, the Critical Illness Insurance Global Market Report 2022 predicts that the critical illness market will grow 11.3% per year through 2026, noting that North America was the largest region in the critical illness market in 2021.

As Americans age and medical choices become increasingly important due to growing rates of diabetes, hypertension and cancer, the need for critical illness insurance grows with it. Further, many Americans are shocked to discover that their existing 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% of medical costs, leaving the critically ill to face massive out-of-pocket expenses.

Additionally, costs for out-of-pocket medical expenses, mortgages, and in-home care can financially overwhelm the critically ill. Many Americans may face impaired credit ratings and eventual bankruptcy from unpaid medical bills and the associated costs of critical illnesses.

Critical illness coverage fills that expensive and often catastrophic gap. It can also act as a standalone plan for healthy young people who do not want to buy medical insurance.

Some recent statistics highlight the need for critical illness insurance. In 2022, 49% of Americans said they couldn't cover a $400 emergency expense, according to the Economic Security Project.

Further, failure to manage chronic conditions can quickly escalate into hospitalizations. The pandemic has made the search for financial solutions more imperative for many consumers and some critical illness policies include coverage for COVID-19.

It may be easy to explain the need for critical illness coverage to people with chronic medical conditions. But what about younger generations? How do you market to them? Education. 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.

Most People Do Not Understand Their Risks

Workers who are offered critical illness insurance often decline it because they misunderstand the risks they face, according to LIMRA, an organization that provides advice to the financial services industry. They underestimate the chance of a heart attack or cancer and don't understand the benefits offered by critical illness coverage.

To sell more critical illness coverage, your blogs or social media campaigns must highlight these important health challenges and the likelihood of debilitating illnesses or incidents to promote the product through education.

Today's consumers are sophisticated. Before any purchase, they do their own research before contacting a professional. This is the sales funnel, where people research, often online, long before they buy. This is where your blog and social media posts must shine. Use appropriate keywords in your posts that draw readers to your website through search engines.

Many of your clients will have some information about critical illness insurance 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 buying.

How Is Critical Illness Coverage Underwritten and How Does It 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.

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

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

Approaches to Selling Critical Illness Insurance

If your clients come to you for life or health coverage, fill that need. Then, approach them about critical illness insurance by providing some “did you know?" statistics. You may also take 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 tailor your sales approach to address their concerns. In either case, your candid approach, as well as highlighting the affordability of coverage, can help clients choose a plan that suits their needs and budget.

 If you already sell life insurance, critical illness insurance is an easy conversation to have. Also, because disability coverage is more expensive, it's a half-step there.

Here are two commonly used approaches to selling critical illness coverage:

The statistical approach. Focus on the facts surrounding the need for coverage. These include statements such as:

• Even those with health insurance struggle to pay their medical and other bills when critical illness strikes. According to the Kaiser Family Fund, 31% of those with health insurance still faced “serious problems" paying their hospital bills.
• A 2019 study published in the American Journal of Public Health found that 66.5% of bankruptcies arose from overwhelming medical expenses. Critical illness insurance can help defray those high medical out-of-pocket expenses.
• Half of home mortgage foreclosures in the U.S. occur in part due to medical issues, according to Physicians for a National Health Program.
• The out-of-pocket cost to manage heart disease in the U.S. can exceed $2,000 per year, according to GoodRx Health. Ask your clients: If a heart condition impacts you or your partner, how would that $2,000 impact your annual budget?

The lifestyle approach. This focuses on the consequences of a critical illness. Maintaining one's lifestyle in the face of a critical illness can be difficult. Among the lifestyle benefits of critical illness insurance to stress are: 

• 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 and acupuncture care.
• Critical illness insurance can help pay for home retrofits you may need to help you adjust to life post-illness.
• Critical illness insurance can help you and your family maintain your current lifestyle by allowing you to meet your financial commitments, such as auto payments or your children's tuition.

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.

Wide Market Appeal for Critical Illness Coverage

From younger buyers to aging couples who face the more immediate possibility of critical illness, there is a big market to mine. Blog posts, social media updates and other marketing 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, Generation X, millennials, and Generation Z, who are increasingly diagnosed at younger ages with chronic illnesses like diabetes, according to Hui Zheng, professor of sociology at The Ohio State University.

“The worsening health profiles we found in Gen X and Gen Y is alarming," Zheng told Ohio State University News in 2021.

You can also market to employers or associations, where the need to offer richer employee benefits continues to grow. Critical illness insurance is an inexpensive value-add benefit to underpin employee retention. It can also help employees get them back to work more quickly after a catastrophic illness or event.

Many employers offer critical illness insurance to help workers meet the challenges of catastrophic illness and round out their benefits packages. Specifically, small employers are increasingly seeking ways to offer a richer benefits package to help attract or retain staff. You can open the door to a client's overall insurance needs by offering critical illness insurance and capitalizing on the need for employees to hold onto their talent. 

No matter which demographic or which organizations you decide to target, the need for critical illness insurance—and the marketplace itself—continues to expand. As our society ages and health care challenges increase, the market will continue to grow.

For agents starting out, offering critical illness insurance provides a high first-year and renewal compensation. Critical illness insurance revenue can help bridge times when the sales engine is down or getting rebuilt.

If your agency does not employ licensed health care agents, consider bringing in a life agent to supplement your offerings. The more coverage gaps you can fill in house, the less chance that another agent will lure away your property-casualty accounts.

Nancy Germond is Big “I" executive director of risk management and education.