Protection sector may follow the shift to escalation in line with CPI
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Protection customers who have an escalation option on their policy currently see their benefits or premiums increase automatically each year in line with the retail prices index.
But Munich Re head of marketing Andy Milburn says more work needs to be done on whether customers stand to gain from providers moving to the CPI.
He says: “Should the industry consider adding the CPI option into protection products? It could be that customers will increase their cover by less each year which may not necessarily be a good thing, but in terms of affordability it may be positive.”
Protection Review co-chairman Andy Couchman says: “The industry has always used RPI because that is what providers and clients are familiar with. If CPI were to become the index of choice, then the protection industry would have to move with it. But it may mean extra costs to have CPI and RPI models running side by side.”
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