Bulletin 22, 2006
Round up
4 - the number of level term life insurance rate changes announced since the last bulletin.
2000 - the number of jobs life insurance reinsurer Swiss Re is reported to be cutting.
5.7m - the number of parents who have no life cover and could easily arrange affordable life insurance.
£73.1m - the amount of life insurance arranged by LifeSearch last week.
Over 70s regulation for whole of life insurance
The FSA announced last week that it is to consult with relevant organisations on changing the ‘age 70 rule’ for term assurance whole life insurance products. The rule has meant that it is more difficult for people aged over 70 to obtain such cover because it can only be sold under more complex investment rules rather than the standard rules for life insurance, even though there is no investment element.
Many companies including LifeSearch have campaigned for several years to scrap this rule and we are very pleased that the FSA is now taking action. We believe the rule as it currently stands is unfair to both consumers and intermediaries and causes unnecessary confusion. With spiralling levels of mortgage debt, some of which is being taken into clients’ later years of life, this change will bring a refreshing opportunity to help those with debts protect against the financial implications of death. Consumers affected by the rule will also have far greater access to more suitable products for whole life insurance.
In addition to level term life insurance, we would encourage the FSA to consider including non-investment linked Whole of Life insurance within the ICOB regulation as such products also have no investment element. If it's pure life insurance, regulate it as pure life insurance - under the insurance rules. If it's investment, or even partly an investment, regulate it as an investment - under the investment rules.Comment of the week
'When we talk about customer service in the life insurance market, we have to remember that it is a joint effort by both the Intermediary and the Provider to ensure that the customer experience is as smooth as possible. I am still amazed that we have in excess of 20% of cases where questions are missed from the life insurance application form. This is not only costly it is very time consuming and undoubtedly contributes to our NPW rate.'
Steve Casey
Product Manager, Bupa
Villain of the week
www.moneyworld.com
If a consumer takes a repayment mortgage they often seek to protect the debt with life insurance that decreases in line with the mortgage debt. This is most commonly known as Mortgage Protection Life Insurance. When we provide quotes for this product we are required to enter a mortgage interest rate, not the client's actual interest rate right now, but a rate that (subject to arrears) ensures that there is always enough money in the life insurance policy to pay off the mortgage in the event of death. It wouldn't be great if the life insurance policy value decreased faster than the mortgage, for example.
One of our advisers received a complaint this week from a client who had experienced this very problem when getting a quote from moneyworld. The issue we have with their site is that some quotes assume a rate as low as 5%, which lowers the premium, yet no information or explanation is provided to the consumer at quote stage about what this means and how it may affect their policy in future.
Put as simply as I can, if you buy a mortgage protection policy at 5% and your actual mortgage rate exceeds 5% at some point in the future then your life insurance will decrease at a faster rate than you are paying off your mortgage and there will not be enough to cover the debt.
We think consumers should be given this information at quote stage - especially on non-advised sales.
Hero of the week 1
Pioneer Friendly
Now that we have all the main life insurance offices publishing their critical illness claims statistics we are now beginning to see providers follow suit with Income Protection as well. Pioneer's claim stats show the friendly society paid almost 96.6% of claims in 2005 with the main reasons for claim being muscular skeletal, back and neck.
We think that at least 60% of the claims wouldn't have received a payment under critical illness cover.
Of the 3.4% of claims not paid the main reasons were 25% for non-disclosure, 23% returned to work before the deferred period ended, 23% had an exclusion applied and 17% were already receiving full sick pay from their employer.
Hero of the week 2
Friends Provident
Congratulations to FP for winning both 'Life insurer of the year' and the 'Customer care award' at the British Insurance Awards last week.
Hero of the week 3
Nick Kirwan, Scottish Widows
Congratulations as well to Nick who picked up Personality of the Year at last week's Life Insurance and Protection Review dinner. The award was presented by last year's winner - Mr Tom Baigrie.
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