Low claim payout for critical illness covers

Two young entrepreneurs saw me to seek my views about developing a mobile app to educate people on their financial planning and buying of insurance.

They ask if critical illness coverage is important for everyone. I told them to avoid it. The insurance companies are making too much profit from this type of cover.

I showed this website to them. The claim ratio is as low as 20%. If the customer pays $1000 in premium for this cover, the insurance company and the agent makes $800. The customer gets an average of only $200 back in claims.

http://tklcloud.com/MAS/publicview.aspx?class=18

They were shocked at this high profit margin. Why do consumers buy this policy? I said that they are ignorant.