30 In focus – critical illness
Grey’s high tech capability will be extended to Scottish Provident in the future. Nevertheless, in contrast to the stance
taken by Resolution, Royal London has retained both the Bright Grey and Scottish Provident brands, and many commentators feel Resolution is making a mistake by not allowing the Bupa CI product to continue – although in practice Bupa is so precious about its name that it is almost inconceivable that it would have allowed any acquiring party to continue to use it in the long term. Peter Chadborn, director of Essex-based
independent financial adviser (IFA) Plan Money, says: “We still have a broad choice of CI providers compared to other markets around the world, so I am not averse to consolidation where it works. Best of breed can be useful if you have two players like Friends Provident and AXA which dovetail with each other. “Friends Provident is strong in income
protection [IP] and AXA will acknowledge that it is not. AXA is very effective in ‘Big T’ teleunderwriting and has one of the best menu plans but Friends Provident scores less well on both counts. However, Bupa has always had strength in its own right and to my mind can stand independently. It has always been at the quality end of the market in terms of CI product and brand, so its marriage with Friends Provident doesn’t sit too comfortably in my opinion.” Bhupinder Anand, managing director of
central London-based IFA Anand Associates, is another to express reservations about the Bupa acquisition, and feels that competition is a much better way of ensuring that the consumer has optimum value than achieving economies of scale through consolidation. He says: “I really like the Bupa product.
Although it’s rarely the cheapest it has often seemed to represent the best value when we have done cover comparisons. Lack of choice of providers is beginning to concern me in a marketplace that should be constantly innovating. Adviser options are becoming more limited and it would be distressing to see further consolidation because there’s a great deal of expertise in the CI sector spread among providers which are constantly pushing each other to innovate, and we are in danger of losing this impetus.” Matt Morris, senior policy adviser at
national specialist intermediary LifeSearch, stresses that decisions regarding which personnel are kept on are likely to prove crucial in determining whether the new Friends Life operation ends up proving a success or failure.
HealthInsurance “In the current economic
climate effective protection has become even more important, but consumers’ budgets are being squeezed” Martin Werth, Ageas Protect
He says: “A lot of what makes providers good revolves
around their underwriting stance and quality of customer service, and much of this boils down to who is in charge of the department. On the positive side, economies of scale could reduce rates but choice is always good, especially with CI as there is scope for differentiation, and the Bupa brand was one that consumers looked up to when mentioned.”
TOTAL NEW INDIVIDUAL CI SALES 2005-2009
700,000 600,000 500,000 400,000 300,000 200,000 100,000 0
632,285 583,891 536,143 511,045 530,214
African market, where it has a 40% market share. It is intending to achieve this goal without getting involved with price wars but its competitiveness has been significantly enhanced since the launch of PruProtect Essentials in November 2009. This basically offers the same two levels of Serious Illness cover as the traditional PruProtect product but has no automatic cover for children, no guaranteed insurability options and the Vitality element doesn’t impact on premiums. Ageas Protect has also made its mark
2005 2006
2007 Year
CI SALES Source: Swiss Re Term & Health Watch 2010
NEW DEVELOPMENTS Let us not forget, however, that acquisitions and exits from the CI field are invariably followed by new entrants. For example, in 2007 Standard Life exited the market and Scottish Widows withdrew from industry quotation portals but these events have been more than offset by the launch of PruProtect in 2007 and the 2008 entry of Fortis Life, which changed its name to Ageas Protect this January as a result of BNP Paribas having bought the right to the Fortis name when acquiring the banking division.
“Two or three years ago providers were falling over themselves to add more illnesses but now the emphasis has really changed to improving definitions” Ben Heffer, Defaqto
There are currently constant rumours that a new player will shortly be entering the CI market and, if it makes anything like the impact that PruProtect has made, the Bupa brand may not in fact be missed for that long. PruProtect, which launched a new range of protection products this March (see page 16), already claims a 6% share of the IFA CI market and aims eventually to dominate in a similar way to Discovery’s pre-eminence in the South
2008 2009
with the launch of its innovative Low Start protection product this January. This offers the same level of cover as its YourLife Plan but gives customers the opportunity to buy much more protection for the premium they can afford today, with many getting 50% more. In future years premiums gradually increase at a rate guaranteed for the entire period of the cover. Martin Werth, managing director of Ageas Protect, says: “In the current economic climate effective protection has become even more important, but consumers’ budgets are being squeezed. We have launched Low Start to help customers afford the protection they need now. It could also suit the large number of customers who buy protection just as they have the additional financial commitments associated with moving house or with having a new baby.”
With most established players, on the other hand, product news is limited to tinkering around the edges. Most commonly this has involved adding new conditions, enhancing wording of existing conditions to over and above Association of British Insurers (ABI) requirements or adding partial payment facilities for less severe conditions otherwise not covered by the policy.
Ben Heffer, insight analyst for life and protection at Defaqto, says: “Insurers are still adding definitions but the main focus is on the ‘ABI plus’ race, which is in full cry. Two or three years ago they were falling over themselves to add more illnesses but now the emphasis has really changed to improving definitions. I’m not necessarily an advocate of tinkering but if definitions are better it’s a good thing as it adds genuine value to the client.
DEMAND STABILISING
Demand for CI has stabilised at around half a million policies a year. According to Swiss Re’s Term & Health Watch 2010, the
www.hi-mag.com April 2011
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