Dread disease - the international scene

South Africa remains the market leader in dread disease product innovation and a number of these innovations are now being implemented internationally. Currently the South African products remain the most sophisticated and innovative but other markets are gaining fast.

Dread disease, also known as critical illness or severe illness, was developed in South Africa in 1983. The initial product covered four conditions, namely cancer, heart attack, stroke and coronary artery bypass grafts. It gradually evolved into the complex dread disease product sold in South Africa today. The product spread internationally and has become a core product in many markets.

Europe and the United Kingdom

The UK market has standardised definitions determined by the Association of British Insurers (ABI) and minimum severity criteria must apply if the cover is to be described as dread disease. Over 50% of dread disease products in the UK are sold as mortgage protection cover. The product sold well initially but following losses due to low rates and the granting of lengthy price guarantees, a number of companies stopped actively marketing dread disease and some reinsurers withdrew their support for this product. Sales are slowly picking up again. Only one company is selling a severity level product based on a South African design.

In Western and Southern Europe, dread disease is a niche product. In Germany, only a few companies sell dread disease as they have a good health system and comprehensive disability coverage. The product is sold as a standalone or accelerated benefit with a three-month waiting period.

Most cover 30 dread diseases and the benefit includes children's dread diseases. They do not have standard market definitions or severity levels. Claims experience shows the majority of claims for cancer, heart attack and stroke. The Austrian product is similar and lump sum disability (TPD) is included as a condition.

In the East and Central European markets, dread disease is a new product and at this stage they only cover 10 to 12 diseases and include children's cover.

Australia

Dread disease is a standalone or accelerated benefit in Australia and 17% of the population are covered by a dread disease product. They offer a basic product with limited conditions or an extended product covering more conditions. They do not have extensive severity levels but have 10% to 15% partial payments for certain less severe conditions. On average they cover 35 to 60 conditions.

Product enhancements are always passed back to existing policyholders. They do not have standard market definitions. The most common causes of claims include cancer, heart attack, coronary artery bypass surgery, stroke and multiple sclerosis.

Asia Pacific

Dread disease cover is sold extensively in the Asian market and is the most popular benefit sold after life insurance. Some countries in this region have standardised definitions. Most products cover an extensive list of conditions and they sell specialised cover for women and children. In Hong Kong, 35% of all life policies sold have dread disease benefits attached.

USA and Canada

Dread disease has not been extensively marketed in the USA and many insurers do not have a dread disease product. Recently some work has been done to relaunch the product and time will tell if it takes off this time.

Dread disease has been very successful in a number of markets with Asia and Australia being the most successful.