Insurance companies ring in the changes with instant decisions and amendments to income protection and children’s cover standing out.
The insurance industry is often criticised for not being innovative enough in convincing families that life, critical illness and income protection products should play an essential part in their financial planning.
Let’s take a look at what changes have been implemented so far and what could be on its way, six months in to the year.
The early part of the year saw AIG make a number of enhancements to its income protection policy, increasing the percentage of salary it can cover, as well as adding a £1,500 guarantee for peace of mind and additional benefits, such as hospitalisation and trauma benefit. It introduced a short-term income protection contract with a 24-month payout, too.
The company also launched its Instant Life Cover as a no-frills, low-cost product. This seeks to shorten the application process, producing an instant decision for those that qualify. Instant decisions and the removal of the need for medical evidence in certain circumstances is a trend we can expect to see develop.
Children’s cover as part of critical illness policies is another area that has seen some development this year. Legal & General and Royal London have both made changes to children’s cover. L&G launched an upgrade option to boost the cover to 50 per cent of the adult sum assured, up to a maximum of £25,000.
It later added a Critical Illness Extra option, boosting the full and partial payment definitions for those that elected for the enhanced option.
Royal London took a different approach, not only offering an enhanced version of its standard children’s cover but also giving policyholders the option to take no such cover. As children’s cover adds cost for those that may have no need for it, the ability to strike it as well as enhance it helps.
As we head into the second half of the year, the launch of a new entrant could help bring some fresh thinking to how things are done.
Tipped to have a comprehensive offering, Guardian is hoping to do things differently beyond just increasing the number of critical illness definitions it offers, which has been the key differentiator of recent years.
So, what is it proposing and could it bring challenges to the rest of the market?Definitions are, of course, not neglected. As well as some strong, clear definitions that could be market-leading in areas such as coma, it is also planning to offer an upgrade to existing policies if definitions are improved over time.
While that could come with additional cost to the policyholder, at least they can decide whether it is important to them.
Protection policies will generally give the option of taking waiver of premium, so that if a policyholder is unable to work due to accident or sickness for longer than a set period, the insurer will take over the premium payments. This allows the cover to continue at no monthly cost.
Guardian has opted to automatically include waiver of premium with its policies, rather than offer it as an add-on. In the event a policyholder is unable to do their own job as a result of sickness or injury for over one month, the policy will continue to provide cover at no monthly cost until they return to work or make a claim.
One of the most important elements of protection is ensuring that, in the unfortunate event of needing to make a claim, any payout gets to the right people as quickly as possible. It is widely recognised the number of policies in trust is woefully low, meaning there can be delays when funds are needed.
Guardian provides customers with the opportunity to name the people they would like to receive the benefit from a life insurance policy as part of the application process, helping it to pay out quicker to the right people. The beneficiaries can be amended at any time, giving customers complete flexibility throughout the life of their policy.
Of course, features such as these can come at an additional cost but the flexibility is attractive. It will be interesting to see how other providers react. As all the changes already implemented this year illustrate, the market is prepared to evolve.
Lucy Brown is head of protection at London & Country