“Increasingly, the price some customers see ‘off the peg’ bears no resemblance to the true cost, once underwriting has been applied. A focus on this market snapshot is no longer helpful in the digital age, in allowing customers to make an informed decision on cover as vital as protection.”
Historical view
This doesn’t seem to be the only reason for the premium decreases over recent years though. To get a true picture of what’s going on, it’s necessary to look a bit further back in time.
Alan Lakey, adviser at Highclere Financial Services and director of CI Expert, explains that the five-year period might be a bit misleading in that the gender directive became law in December 2012 and this was met by premium rises across the board.
This was particularly the case for women who had previously benefitted from lower premiums due to living on average two years longer than men.
“Over 10 years the premiums will have risen,” says Mr Lakey. He adds that insurers gradually reduced their premiums for a number of reasons:
- The increases were “knee-jerk and they were guessing to a certain extent”.
- Better use of technology has allowed profit margins to be retained by driving down costs and therefore premiums.
- Most insurers offer their true low premiums to “first class lives meaning that more clients are loaded than ever before”. Therefore, as indicated by Mr Jeynes above, the low quoted premium may not be reflective of the average premium.
- There is still a “price war” because many advisers continue to promote the cheapest as best as opposed to best value. This is particularly the case with critical illness.
Customer engagement
One of the key developments in the protection market over recent years and, arguably, instrumental in ensuring improved engagement is innovation in product design.
Vitality pioneered the concept of ensuring regular touch-points with health and protection products, outside of a claim, to help ensure they are used and value. Discounts and rewards offered to those who monitor and improve their health help achieve this whilst, at the same time, reducing claims rates overall.
A number of providers are now incorporating new services into their protection offerings to help ensure usage of the product even if claims aren’t made. These are many and varied but typically include partnerships with online doctor consultation services, care advice providers and legal services.
Now for a closer look at trends in premiums and sales for each key area of health and protection.
Life insurance
Swiss Re Term & Health Watch 2017 reports an increase in total new term assurance sales for 2016 of 5 per cent, the highest level of new sales since 2012. Standalone term assurance sales far outweighed decreasing term or family income benefit, with or without a CI rider.
The mortgage market is currently buoyant, despite the widely reported rise of generation rent. The most recent data from the Council of Mortgage Lenders reveals that mortgage lending in 2016 was up 11 per cent on the previous year, at £245bn borrowed.
Yet how many of those loans are protected? As pointed out by Swiss Re, the increase in new term sales is positive but there’s always more that can be done.
