The price of critical illness insurance is set to rise by around 50% over the next few months, while cover for 'lifestyle' conditions such as diabetes will be withdrawn.
Four of the six largest insurers in the market told broker LifeSearch that they will hike premiums in the new year to pay for rising claims, The Guardian reported last week.
Simon Burgess, managing director of insurance underwriters Goodfellows, says: “There is a high incidence of claims and policies that have been sold too cheaply. Insurers are probably making losses of around 60% on them, so a 50% rise isn't really enough.”
Burgess says price rises are being driven by reinsurers who carry the bulk of the risk and who have pulled out of the market. And he believes that income protection is more valuable than critical illness cover. He says: “If someone can't work then they need cover. We're living longer, but few over 60 can afford illness policies, which are in any case of minimal benefit. They don't cover muscular diseases or stress – the most common claim under income protection.”
Mark Osland, director of Croydon-based IFA Fidelius, believes a 50% rise is unlikely. He says: “I think there may be an adjustment, but it is still a competitive market. This is a good opportunity for brokers to rebroke for their clients.”