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The Life Insurance Market
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Now the economy has struggled meekly out of recession the world of Protection advice is presented with challenges - both good and bad. Aviva’s recent research which highlights the increase in people off work long term through stress brings home the need for Income Protection more than ever while anecdotal evidence suggests consumers are more Protection conscious than ever.
Running against this is the economic impact of growing consumer indigence, which must lead to higher lapse rates and more applications not being taken up. To take advantage of the positive opportunities we need to minimise the bad. One area where the industry is making great strides forward in the latter is offering premium reductions when health exclusions are added to Critical Illness and Income Protection policies.
It is not uncommon for consumers to have one or more illnesses excluded from their Protection policy. In fact it happens in around 10-12% of Critical Illness and Income Protection applications. A condition that has been excluded cannot be claimed on, which in effect reduces the comprehensiveness of the policy, so it makes sense that the premium should, as a general rule, also be reduced.
Bupa were the first insurer to offer premium reductions for exclusions and were followed by Fortis, who extended it to Income Protection products too, when they joined the market in July 2008.
Since LifeSearch began campaigning for all insurers to follow suit last February, LV=, Legal & General, Zurich, Axa and most recently Aviva have begun their own offering. Aviva also offer premium reductions for spinal and mental health problems on their Income Protection policy.
Sadly not every insurer will do this and clients with exclusions added to their policy can find themselves paying the same premiums as someone without any exclusions.
Consumers should be aware that if they take out a policy and a significant exclusion, such as for Cancer, is imposed there are insurers who will cut their premium, so there’s no need to pay over the odds for a policy that can't be comprehensive.
Life offices offering these discounts will undoubtedly have an advantage over those that don’t in the eyes of good protection advisers. Overall quality of the product is the main consideration but it stands to reason that when there is little to differentiate between policies and one life office has the important differential of premium reductions for exclusions, that that provider will win the business, because IFAs should surely deal with offices that treat customers most fairly.
It is not only TCF, but good for sales as it reduces the number of policies 'not taken up.' All insurers taking part in this important initiative are to be applauded.
As the on-line comparison sites seek to make price the only differentiator, this kind of qualitative differentiation is what advisers must make key to their choice of insurer if we are to boost the market and get sales moving again. We have an opportunity, it’s up to the decision-makers of our world to grasp it.
Matt Morris, LifeSearch
This article was published in the February edition of Money Marketing.
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