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Critical crunch as NU raises CI premiums by 40%

IFAs are predicting that Norwich Union&#39s decision to raise the cost of guaranteed critical-illness premiums dramatically by 40 per cent will lead to the market withering.

Guaranteed policies account for virtually all of the market and other providers are widely predicted to follow NU&#39s move, leading to a big downturn in cover.

NU says the premium rises are necessary because of advances in medical science and the increased cost of reinsurance and capital. It follows the decisions by Swiss Re and Munich Re this year to stop reinsuring long-term guaranteed critical-illness cover.

The company says there have been 900,000 CI policies taken out this year across the industry but predicts this will fall to the 700,000 level of two years ago. NU has about 25 per cent of the IFA protection market – half of which is CI. It has an overall protection market share of 18 per cent.

NU only sells guaranteed CI at present but plans to launch a reviewable policy next year.

Norwich Union mortgage & protection marketing manager Keith Simm says: “All the market needs to do this as guarantees now cost more. The increase from reinsurers is just being passed on. There is no change in our margins.”

WHFIS director Mike Stannard says: “This is certainly going to lead to a slowdown and it does not help a market that has not really established itself yet. NU is probably only the first of a number of companies to do this. A reviewable policy is just a get-out policy for the insurer.”


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