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Insurancereview – April 2012

Welcome to Mortgage Strategy’s monthly protection column, Insurance Review, where I will be surveying the latest news and views from the world of insurance.

My day job is chief executive of Protection Review, an organisation that has decades of experience in just about every area of the protection market from advice and customer service to sales and marketing.

This means I’ll be covering the most important developments in the world of protection and general insurance from an independent point of view.

First things first, confusion still reigns about what will happen regarding the build-up to the European Court of Justice gender ruling and other legislative changes which take place at the end of the year.

December 2012 may seem like an age away, but advisers should already be thinking about how Gender Day changes will impact their business both before and after gender neutral pricing kicks in.

In the run-up to December things may get busy as advisers try to rush business through before the expected price increases, especially for cases that need underwriting as applications need to be in force before the December cut-off date.

Estimations for the price increases, taking gender and other changes into account, range from around 10% to 30% and new business could fall as a result once prices have risen.

Re-broking old business to save money could become a thing of the past, which could affect a number of business models, with some predicting new business volumes could fall by as much as 40% next year.

As of now, the industry doesn’t yet know how changes to existing business will be treated and whether or not policies need to have started or just have a future start date agreed.

What we do know is that Q4 2012 is likely to be busy with some life offices already providing marketing materials and sales aids for advisers to use.

However, I’ve also read a few blogs and columns recently suggesting some people should wait until after G-Day before buying cover, which is nonsense. While the cost of life cover is likely to increase for women, income protection rates could fall. But this is too simplistic.

First, it is not just gender that is the issue. In addition to G-Day, there are other significant changes affecting life offices which could also push premiums up. And more important, those who need protection should never wait to buy for the simple reason that their circumstances could change.

Even if rates for female IP do fall in January – those who have already bought could switch to save money.

Either way, now is the time to contact clients who need protection because for the first time in many years the price of protection products such as life insurance is set to rise significantly – and we’ve got a window to make the most of it.

talkingpoints

  • I RECENTLY LEARNT of a broker who converts one in five phone calls where people enquire whether they have been mis-sold payment protection insurance into income protection sales. The IP industry has suffered for the wrongdoings of the PPI market but there is light at the end of the tunnel.
  • IN RESPONSE TO calls for a national Protection Awareness Day the Association of British Insurers is considering setting up a website that would provide consumers with general information about protection.
  • THE PERSONAL FINANCE Society is continuing its independent IFA protection training sessions around the country, taking in Leeds, Bournemouth, Exeter, London and Bristol. The in-depth sessions will include market information, technical product details and offer sales tips.
  • CONFUSED.COM HAS launched a Facebook video app called House of Horrors to raise awareness of the importance of home insurance. Users are presented with a video of a burglar breaking into their own home via a Google Maps image of their street.

Sales tip of the month

There is a list of reasons why buying two single life cover plans for a couple is often better than buying one joint life policy.

A joint policy only pays out once and costs roughly the same as two policies, which could both pay out.

Cover remains in force for the survivor in the event of one death and writing the cover in trust is much more straightforward.

It also avoids any potential disclosure issues if one of the couple doesn’t want the other to know something.

 

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