Exeter Family Friendly is to increase premiums on its short-term income protection plan by 15 per cent.
The income protection and private medical insurance provider says the incidence of claims on its Bills & Things product has been higher than anticipated.
From 2 April premiums on the product will start from £11.49 per month, up from £9.99 per month.
Exeter Family Friendly chief executive Andy Chapman says: “Over the past couple of years, we have experienced a higher incidence of claims on Bills & Things than we expected when we initially priced the product.
“In addition, our initial pricing assumptions were based on Bills & Things being sold predominantly direct to consumers; whereas the product is now sold exclusively through advisers. This has had an impact on both our acquisition and business processing costs.”
He adds: “This is not necessarily the type of news that advisers want to hear, but we feel it is important to be as open and transparent as possible.
“We know how important it is to deliver competitive premiums, but equally we understand the importance of delivering sustainable products and performance for the long term.”
As of 2 April quotes for new business will include the price increase, while existing customers will have their premiums revised at their third renewal, as premiums cannot be reviewed for the first three years of a policy.
Exeter Family Friendly has distributed Bills & Things through advisers only since late 2010.
The product pays out a benefit for either one or two years in the event of being unable to work through illness or injury.
There is no financial underwriting at application or claim, and premiums are rated according to age.
Exeter Family Friendly brand and marketing manager Nick Jones says the lack of financial underwriting may have had an impact on the value of claims paid in recent years.
He says: “Whilst this means Bills & Things offers greater simplicity and clarity for consumers, it means we have one less control at claim.”