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Why your client’s insurance premiums will rise

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  • 24/01/2012
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Why your client’s insurance premiums will rise
Brokers need to be speaking to their clients and getting them on to cheaper life insurance premiums before the gender pricing directive kicks in on 21 December, warned Bright Grey’s Roger Edwards.

Last month, HM Treasury estimated that life insurance premiums will rise by 10% to 15% per year once the directive is enforced.

Edwards, proposition director at Bright Grey and Scottish Provident warned that women could see an increase of as much as 20% in the cost of life insurance.

“Looking ahead, the implication is that you may as well have the conversation with as many of your clients as you possibly can to make sure that you can get them onto a cheaper rate, especially the ladies. Don’t be surprised if after December the prices are different because who knows for sure what will happen once the competitive nature of the market takes over.”

He added the outcome of the Gender Directive is extremely difficult to predict because market forces could bring prices back down.

“But, if we do the maths then wisdom suggests female rates could edge up by 10 to 20%. The mix of business that we have shows that there are still more men buying protection insurance policies than women.

Dean Mason, practice principal at Mason’s Financial Planning said that despite insurers having a timeframe to implement gender-pricing, they could choose to hike prices at any time.

“We don’t know exactly when insurers are going to put premiums up. They may decide to do it next month or next quarter. I know they’ve got to do it by the end of the year but I think advisers need to be talking to their clients now.”

Mason added: “I have just as much protection business on my books as I have mortgage business and a lot of that has been down to talking about the Directive. Once a month I do a proactive marketing day where I sit down and look at what I can contact people about. I did that last Friday on the Directive, telling clients that it is now or never. I’ve been very hands-on about this and brokers should be doing this too.”

Dominik Lipnicki, director of Your Mortgage Decisions said that from a compliance point of view, changing a separate single policy is very difficult.

“As Bright Grey and everyone else would know, to go back and replace existing serious illness or critical illness cover is extremely dangerous because the terms change all the time and when they change they usually change for the worse as medical science gets better, so the client ends up getting covered for less.

“We want to make sure clients are protected as well as they can be for the money they can afford to pay. That doesn’t mean a cheaper premium it just means the best possible cover.”

Meanwhile, insurance providers have made plenty of large-scale changes, including amending policy documentation, updating IT systems and sales and marketing data to prepare for the Directive.

The European Court of Justice was threatening to bring the Directive in from 1 March 2011, so insurers are well ahead of themselves and ready for general-neutral pricing from that date. But the market will see a flurry of activity in the run up to the deadline.

“There could either be a closing down sale of gender priced protection products in the run up to December or there will there be a huge flurry of activity from IFAs to get as many of their clients a good rate,” added Edwards.

Exeter Family Friendly is one of the first insurers to publicly revamp its protection products to accommodate the EU ruling.

The provider re-launched its Income One income protection (IP) product (formerly known as the Professional Income Protection plan) last September. Product changes included removing the premium structure to comply with European law and providing a higher protection level, up to 65% of income, up from 50%.

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