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Critical condition as premiums set to rocket by 50%

Guaranteed critical-illness policy premium rates could leap by 50 per cent in the next 10 months in a dramatic market shift which IFAs fear could spell the end of the market.

They claim the guaranteed market would virtually disappear as consumers already think CI cover is too expensive.

Guaranteed CI, which offers review-free premiums, dominates the market, accounting for almost 98 per cent of the 750,000 policies sold in 2001.

The premium rises, expected to coincide with a revised ABI code of practice due in May, would mark the first major increase in premiums and follows the announcement by reinsurer Swiss Re in June that it was stopping underwriting guaranteed business.

Rival reinsurers have been telling product providers that they will be raising their charges to cushion their exposure to the risk.

Providers admit that consumers would bear the brunt of the increases.

They say there will be a place for guaranteed business but consumers will have to pay more if they want to avoid reviewable premiums.

Norwich Union head of pensions and protection propositions Willie Mowatt says: “If consumers really feel they want a guarantee it will be there but they will be looking at paying more.”

Skandia protection brand manager Shelley Robertson says: “It looks as if the increase in the guaranteed CI market could be as much as 50 per cent or more in some cases.”

Rickman Tooze adviser John Haynsworth says: “The feeling is that guaranteed business is generally quite expensive. If the premiums go higher, it will probably just kill off the market.”


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