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Bupa loss has critical consequences

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

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Comments

There are 17 comments at the moment, we would love to hear your opinion too.

  1. Before Mr Lakey starts making comments about Friends Life perhaps he should wait and see.

  2. The integration project to merge three propositions and brands is likely to be a minefield.

    However perhaps this consolidation will take the heat out of the price war – which on the whole hasn’t increased client demand – nor has it helped provider or adviser profit margins.

  3. What have the regulators done for society?

    Easy, they have decimated consumer choice.

    I used to predict five shades of grey as they have in Germany, make that three.

  4. BUPA
    I always understood BUPA to be a non-profit making organisation! I am aware of a number of elderly people that have been paying BUPA private health fees for years and are now afraid to stop because of failing health. Their fees are already far too high; must they now expect increases forcing them to stop payments, just when they need the protection more than ever?

  5. Dear Anonymous, who are you, by the way,

    I haven’t made any comments about Friends Life – we do not yet know what this hybrid creature will look like.

    What I find surprising – and I shouldn’t after so mnany years in this industry – is how three brands with varying degrees of public trust and recognition are shelved in favour of a name filched from a medicore Ken Loach film.

    We talk about name awareness and brand recognition and we know that Richard Branson has built his fortune on such. It is therefore strange that a new name is being dreamed up as I cannot see how this will grow the protection pie and reduce the protection gap.

    Perhaps they’ve had tips from Norwich Union…I mean Aviva.

  6. Evan, how can a commercial arrangement be the ‘fault’ of the regulator? Hell, I like to kick the FSA as much as the next IFA but I’m unsure how its their fault this time?

  7. Alan i agree with your points Bupa is a institution
    to many of us
    As a IFA i am sad to see them take this action
    Also i am always pleased to read your contribution in many press articles your knowledge is well respected
    Nick J positive solutions

  8. Are you saying that it is the best CIC product because Pru Protect has Serious Illness Cover, or because you rate the BUPA cover over PruProtect?

  9. “Bupa’s claims are historically very good, better than Friends Provident”
    Not sure where the writer has got this from, Bupa claims stats in 2008 were around 86% (Bupa do not report the exact figure) Friends Provident were 87%.
    In 2009 Bupa were reported as 2% declined due to non-disclosure & less than 10% were declined due to not to meeting definitions so do we assume that around 88%-89% were paid ( Again they do not report an exact figure) .Friends Provident were 92.6% -5.3% were declined due to not meeting definitions and 2.1% due to non-disclosure.
    So does this mean that Bupa are not strong at administrating claims or that their policy definitions are not what they are cracked up to be? You decide….

  10. It is impossible to accurately rate the PruProtect plan because of the partial payments and also because so many of their conditions overlap with each other.

    A good plan, clearly, but devilishly hard to analyse…unless pruProtect or Hannover Re can tell me otherwise.

  11. Just a point on this brand name business: of course Resolution doesn’t have the option of using the BUPA brand, or indeed the AXA brand, for the simple reason that it has only acquired parts of both businesses. In each case, the vendors have (very sensibly) chosen to retain their brand names for their continuing operations.

  12. Quite, but even the FP brand retains a certain cachet.

    Friends Life……

  13. John whatever your name is.

    You obviously know more about this than I do.

    For some reason I believed that the burden of overregulation and Lord Turner’s ‘Bad policy’ was the cause of all our ills.

    I’ll return to my box now.

  14. New name or not – I cannot see Resolution spending Aviva sized sums of money (£50m?) on building a new brand – even if Bruce Willis was available.

  15. @James Bowles

    Hi James, I know about the Hannover viewpoint but without wishing to carp about this the point is that whilst PruProtect covers 120 more conditions than a typical plan the ability to value these with the myraid overlaps is nigh on impossible.

    How do you rate a plan that pays out 25% on a condition that others pay 100% on but also pays 25% on one which is not covered by any other provider?

    I’m not being difficult but I would love somebody, anybody, to provide me with statistical evidence (not inspired guesswork) backing up these Hannover assertions – or anybody else’s, for that matter.

  16. Comments like `I believe that one of the reasons that borderline claims are sometimes turned down is in the interests of profitability` do nothing to help the industry and the perception of claims not being paid when, nothing is further from the truth. We really don`t encourage the public to trust us when we give out such negative opinions rarely based on fact

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