Critical Illness Insurance

The Dutch Financial Markets Authority recently conducted a study on how private clients are informed and warned about the purchase of financial products. One of the products they considered was the sale of critical illness coverage.


Critical illness insurance is often taken out by people taking out a mortgage, usually as part of a term life insurance policy. It can also be purchased as a standalone product. The policy pays out in a lump sum if the borrower becomes seriously ill with one of the listed specific diseases, most often cancer, heart disease, stroke, etc.; It helps with loss of income due to illness and general lifestyle changes that can result from illness.



Companies that sell critical illness insurance must meet certain standards, and while these are fairly well met, the study found that there could be some improvements that could help a customer better understand the product.

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The FSA visited companies and hired mystery shoppers specifically to verify compliance with regulatory requirements for sales processes in the sale of critical illness insurance.

Control visits were carried out in 42 companies. These are mainly financial and mortgage planners, as well as banks, mortgage lenders and insurance companies. Research firm Research International conducted 80 mystery shops for a total of 51 companies to report what is really going on.



Retail operations head Sarah Wilson said that while many of the results were positive, some problems were identified. Measures have been taken to combat them. Treating customers fairly is paramount, especially to make insurance application forms and documents more understandable. So far, these changes seem to be useful.

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However, critical illness coverage is complex, and some problems arise with scheme funding and general insurance documentation. It is sometimes difficult for customers to understand exactly what they are selling, making it difficult for them to assess whether it is the right coverage for them or whether it is more appropriate to benefit from an income protection product.

Consideration should be given to the client’s needs and a careful assessment of the type of protection they require. However, when there were two or more types of policy, cost was sometimes the only aspect considered in recommending the most suitable one. Other factors may have been ignored, such as B. Terms covered or the availability of other products more suited to the needs of a particular client.

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The wrong sale is a risk, but most companies take reasonable steps to eliminate it. There appear to be good training programs and risk-based monitoring.

As with premium mortgage products, customers have time to consider their options before deciding to purchase coverage.


The survey results provide some assurance that customer needs are being taken into account and that any necessary changes can only be for the better.


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