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Many people with everyday health issues are currently better off NOT using the cheapest insurer. This report explains why.
The price of any insurance product is important when you fit the insurers box. But what if you don’t? And what if the number of consumers who didn’t fit the box was growing every week? More and more applications for life insurance are now being treated as what our industry calls ‘non-standard’ and what was considered normal health five years ago isn’t today.
In order to lure customers with seemingly cheaper premiums, more and more questions are being asked of applicants when they apply for life insurance and as a result more and more consumers are being hit with:
- Increased premiums.
- Wider exclusions.
- More frequent declines.
This is all very well if you are young, have perfect health, don’t smoke, have a ‘run of the mill’ job and your close family are perfectly healthy too. But what if you’re not?
Inside this issue
PAGE 2. I’M STILL STANDING - Encouraging news about serious illness.
PAGE 2. SOMETHING IS BETTER THAN NOTHING IN PROTECTION. OR IS IT? - 5 good reasons why this ain’t necessarily so.
PAGE 3. YOU’RE THE ONE FOR ME FATTY - Obesity and the effect is has on life insurance.
PAGE 3. EVERYBODY’S TALKING - What the industry has to say.
PAGE 4. PETER LE BEAU - A personal insight into the changing world of protection.
Away from the numbers
Price is important. Not so much the price consumers are quoted at outset but the real price they need to pay every month when they have been underwritten. This is where independent advice can really add value.
‘It is becoming increasingly more common for customers who’s health isn’t 100% perfect that we can save them more money by choosing one of the more expensive product providers.’
- LifeSearch Adviser
Some call it cherry-picking, some call it preferred life underwriting. Either way it helps to shop around as not all insurers are the same. In fact, in the current environment, they can be very different.
Table of case study decisions
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CLIENT SEX AND UNDERWRITING CONCERN
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PREMIUM & DECISION FROM CHEAPEST PROVIDER AT OUTSET
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LIFESEARCH DECISION & ACTUAL PREMIUM CHARGED
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BENEFIT TO CLIENT OVER 25 YEARS BY USING A MORE EXPENSIVE INSURER
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Male, Diabetic
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£21 & postpone
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£26 +100% loading = cover at £52pm
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No cover offered otherwise
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Female, Stress with anti-depressants
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£18 +100% loading = £36
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£20 +50% loading = cover at £30
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Saved £1,800
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Male with high BMI
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£32 + 50% loading = £48
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£38 and no loading
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Saved £3,000
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Female with history of breast cancer
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£50 + 100% loading = £100
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£62 + 50% loading = £91.50
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Saved £2,550
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Non-advice consequence chart
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TYPICAL ACTION NON-ADVICE
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ISSUE
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TYPICAL RECOMMENDATION WITH ADVICE
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One joint life policy
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A couple buying life insurance
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Two single life policies
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£200,000 lump sum
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Example sum assured
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£12,000 per year Family Income Benefit
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Not provided
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Counselling and rehabilitation
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Automatically provided free of charge through LifeSearch
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None
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Use of trusts
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Flexible Trust arranged
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No
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Ability to seek redress from ombudsman if policy sold is unsuitable
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Yes
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NON-ADVICE
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CONSEQUENCE
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ADVICE
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£200,000 with threat of minus 40% Inheritance Tax = £120,000
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Payout if both lives were to claim after 5 years of a 25 year term
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£12,000 x 20 x 2 = £480,000
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Premium = £24.28pm
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Example cost for a non-smoking couple, in good health, aged 35 *
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Premium = £23.89pm
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Difference in payout? £360,000 *rates correct as at October 2005
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LifeSearch says... Cherry picking does not benefit UK consumers overall as it leads to social exclusion, which only widens the £2.3tn UK protection gap – unless you speak to an adviser who knows what they’re talking about. More than a third of new applications are now treated as non-standard, with as many as two thirds requiring some form of additional information, on top of a 30 page application form, before cover can commence. This number has doubled since LifeSearch launched in 1998.
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