Adding exclusions? Cut the premiums.
Issue of the month
Exclusions on a policy can be a turn-off for a client. They feel it's unfair and can result in the policy not being taken up. As Income Protection sales in particular are struggling, this is another problem that advisers could do without. When the exclusion is for the spine, or mental illness, it is even harsher for the client as these are two of the most common causes of claims.
When an exclusion is added by an insurer, the premium should be reduced to reflect the reduction in comprehensiveness of the policy. The only provider that currently reduces the premium if they impose spine or mental illness exclusions on Income Protection is Fortis, which appeals to clients and is good for advisers as fewer policies are 'not taken up'. Both Fortis and BUPA offer reduced premiums for exclusions on certain Critical Illness conditions.
All providers should follow suit. It would be an important step towards halting the slump in sales and will help to close the protection gap.
Round up
0 – the cost of additional Critical Illness when a customer takes out an Income Protection policy under the LV= Flexible Protection Plan
3 – number of rate changes since the last bulletin (Royal Liver, L&G, Friends Provident)
14 - the number of positive protection stories we spotted in the consumer press since the last bulletin
85 – the age AXA have increased their Life Cover limit to, up from 70
1533 – the percentage increase in mortgage borrower fraud between 2004 – 2008, according to London & European Title Insurance Services
Case study of the month
Client: Mr De Sayrah
Needs: as the client was 70 years old when taking out his Life Cover policy and had other complicating issues, his policy was rated with one insurer, from £138 up to £213.
Our recommendation: we switched him to Legal and General on standard rates for a premium of £135 a month over 5 years and wrote it into trust too, proving the value of specialist advice and market knowledge.
LifeSearch Comment
It is crucial to get regulation right as the current financial turmoil proves. Unfortunately it doesn’t always happen, as LifeSearch MD Tom Baigrie explains here.
Hero of the month
- AXA...
…for announcing they are planning to cut premiums on Critical Illness policies when they add certain exclusions. BUPA and Fortis already offer this and hopefully other providers will follow suit, not just on Critical Illness, but on Income Protection too.
Journalist Competition
We have a top range digital camera up for grabs and, as the Oscars are taking place on Sunday, here’s an awards question to get you thinking. How long will the combined Best Actor and Best Actress winners’ speech last? So, for example, if you think Brad Pitt and Kate Winslet will both win and talk for 3 mins 30 secs each, your answer will be 7 minutes. The closest guess wins. Please email me your predictions by Sunday. Good luck.
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