MetLife launches "critical" shift in strategy: the life insurance giant will bundle critical care products in the first quarter of 2005

Risk & Insurance, Oct 1, 2004 by Steven Yahn

The AFLAC duck and other pioneers of critical-care insurance policy options in the United States will soon be looking over their shoulders at the long shadow of MetLife, which is on verge of launching a major foray into this still-emerging market in the United States.

The first wave of activity will come from the insurer's institutional sales force and will be tailored to serve many of the nation's largest corporations. MetLife currently does business with a formidable lineup of 88 companies on the Fortune 100 list. Sales to other businesses and individual policyholders will start through the company's vast broker network.

"MetLife is entering the critical-illness business in both the institutional and individual maketplace, and has launched its pilot program," MetLife said in a statement to Risk & Insurance. "The company will begin program rollout first quarter 2005."

This will be MetLife's first venture that specifically bundles coverage for a number of critical illnesses, which in other plans include heart attacks, life-threatening cancer, strokes, multiple sclerosis, major organ transplant, renal failure, blindness, deafness and paralysis. Given the breadth of products MetLife sells to both institutions and individuals, the new bundled approach provides MetLife with an excellent opportunity for cross-marketing sales.

Critical-care plans, long popular in Europe, appear to finally be catching on in the United States for several reasons: Until recent cutbacks in employer insurance coverage, many critical-coverage conditions were covered by an existing plan; aging baby boomers are beginning to suffer from an array of ailments, with more of them classified as critical; and, among health-care professionals and consumers alike, there is greater understanding of the benefits of critical-care coverage. In short, says the Long Term Care Advisory Services, under many critical-care insurance plans, policyholders receive a lump-sum payout upon diagnosis, and that money can be used any way they choose: to cover medical costs, pay for transportation of relatives to a patient's house, or take a restful, recuperative vacation.

AFLAC, one of the earliest to introduce critical-care coverage in the United States, offers an innovative approach that does not pay out a lump sum upon diagnosis. Instead, AFLAC provides some money immediately, say $5,000, to cover upfront costs. But from that point on, the policyholder is paid only after demonstrating that a service has been provided.

Warren B. Steele, senior vice president of U.S. marketing at AFLAC, argues that among other benefits, an indemnity-based (or pay-as-you-go) approach prevents somebody who gets a lump-sum distribution from spending it unwisely.

Also, the AFLAC policyholder who stays with the indemnity-based plan continues to have coverage in case of a recurrence of the critical condition.

Other insurance companies that have established a beachhead in the U.S. market include Mutual of Omaha, Standard Life Insurance Co. of Indiana, Allstate and Transamerica.

Beyond that, there is a rumor afloat that a major insurance company other than MetLife is close to unveiling its entry into the critical-care market with an indemnity-based product.