In focus – critical illness
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In Focus: Critical Illness Cover Surviving the squeeze
Protection advisers operating in the CI market face consolidation among providers, a depressed mortgage market and, with consumers still nervous about spending, a battle to recommend on quality rather than price. Edmund Tirbutt reports on an industry under pressure.
A reduction in provider numbers might have left the individual critical illness cover (CI) market with a shrinking feeling. But the jury remains out regarding whether this shake-up will ultimately prove beneficial or detrimental. Skandia‘s withdrawal from CI in
September 2010 will certainly be felt at the quality end of the market, especially as it was the only provider to offer “rolling term” cover – which has provided a valuable halfway house between term and whole-of-life. The company, which remains in the life market, does not rule out returning to CI in the future. Phil Carroll, head of financial planning
at Skandia, says: “We had been offering a quality niche market CI product, which was putting features before price, and the volumes of business we were writing didn’t fit in with where we want to be going at the moment. We had been in the market for 10
April 2011
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years and had significant business increases to start with but these had dropped off. The market has moved more to price and we would prefer to be out of it for the time being while this situation continues and to review our future options.” Royal Liver further reduced choice in September 2010 by
closing Progress, its protection division, to new business. It reported that, due to capital constraints, the Society was not in a position to continue to invest in the long-term prospects of the Progress business.
CONSOLIDATION CONSIDERATIONS Many commentators also suggest that Bupa could not have been raking in too many profits from its protection business as it was prepared to sell out in February 2011 to Friends Provident’s parent Resolution, which had also acquired the majority of AXA Life’s protection business in September 2010. Resolution only has a licence to continue using the Bupa name for up to nine months, after which it intends to come up with a “best of breed” CI product for new business to replace those currently offered by all three of its protection subsidiaries. By the end of the first quarter of this year the
best of AXA Life and Friends Provident will already be combined as Friends Life. Steve Casey, head of sales and marketing at Bupa Individual Protection, says: “We expect to have a very compelling proposition by the end of the year, combining AXA’s competitiveness in a product which is market leader in terms of quality. We should benefit from economies of scale, which could include a possible improvement in our tax position and we may also be able to take a different position on reserving. There will be no teething problems as we are totally committed to maintaining service standards.” Economies of scale have clearly been
reaped following the 2008 acquisition of Scottish Provident by Bright Grey’s parent Royal London Group. The newly combined parties have achieved significantly better reinsurance rates on the grounds that Bright
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