Within a threemonth period, there has been massive change in the protection industry. We have lost Royal Liver, we are going to lose Bupa, we are going to lose Axa, we are going to lose Friends Provident and gain Friends Life and Skandia has pulled out of the critical-illness market. In that short space of time, there has been massive upheaval.
This is bad news in every way really. If we focus on the Bupa deal, what we have got is Axa, Friends Provident and Bupa all being subsumed into Friends Life.
If we look at the propositions, we can see that in the majority of instances, Bupa has got the best product. They have certainly got the best critical-illness product and it vies with Friends Provident for the best income protection product.
But Bupa has more than that, Bupa has got by far the best brand and brand awareness.
People such as Richard Branson have proved the value of brands over the years and if I was someone like that, I would be asking, can I buy this once you’re done with it?. It is astonishing that they would give up something like Bupa.
It will also have an impact on product and product design. Although the Bupa plan may be the best one, will they retain it? It may be the best plan from an advisers’ perspective but the best plan is not necessarily the most profitable plan and Clive Cowdrey wants profit. So there is that concern.
What impact will it have on underwriting and on claims? Bupa’s claims are historically very good, better than Friends Provident. In terms of pricing, the price of life insurance in the UK is the cheapest in the world. Given that the Japanese live on average two-and-a-half years longer than us, there is not any logic to that.
In terms of future prices, I think prices will go up. In fact, I would welcome prices going up. I believe that one of the reasons that borderline claims are sometimes turned down is in the interests of profitability or margins. I would far prefer to have a dearer product where they say,’ yes, this is a valid and sensible claim. It may not technically fit in but morally we should pay it’. Whether that actually occurs, I do not know but prices will go up as fewer firms remain in the market.
Bupa’s critical-illness plan is arguably the best on the market and I would hate to think the people who were responsible for designing and bringing that to market might not be part of the new way forward. It is clear they have got to fit three comp-anies into one pot.
Alan Lakey is a partner at Highclere Financial Services