Insurance giant, Prudential, has caused outrage among the broker community by increasing the price of its critical illness (CI) insurance and refusing to honour all the applications currently awaiting processing.
The price increases, which could be as much as 40% according to some brokers, have brought Prudential in line with other insurers who recently raised their premiums. However, Prudential has been criticised for including all pending applications in the change.
Paul Keeble, spokesman for Prudential, defended the decision and said: ‘We made the changes, partly because of the new guidelines from the Association of British Insurers (ABI) which will change the definitions of CI, and partly because of the volatility of the reinsurance market. It was not pre-meditated. In addition, we are offering all those who have applications pending, 30 days free life and CI cover, with no obligation to buy.’
However, brokers have accused Prudential of changing the goalposts, and delaying the processing of applications until the announcement was made. Ongoing cases will now be massively disadvantaged as the insurer has also changed the terms of the plans so the rates are no longer guaranteed for the life of the policy, and instead will be reviewed every five years.
Paul Russell, associate director at Bournemouth-based mortgage adviser, Hearns Independent Financial Services, said: ‘I knew the rates were going up as Prudential had written to us, but there were assurances that applications received before 19 March would be honoured. In my opinion, it has promised something it could not, or would not, deliver.’
Kevin Carr, senior technical adviser at insurance broker, LifeSearch, agreed: ‘LifeSearch feels this action evidences a cavalier approach to our customers’ needs for real protection in anxious times. Had the Prudential simply closed to new business, no such accusation could be made, but by treating all those who have already applied with contempt they hammer yet another nail in the coffin of the UK life insurance industry.’
LifeSearch has now begun legal proceedings and is trying to bring together all affected parties in a bid to seek ‘¦redress for losses of both clients and intermediaries with business in the pipeline.’