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Is real-time pricing around the corner?

Association of British Insurers head of protection Nick Kirwan believes it is. He says the protection industry, which has recently been repricing at a feverish rate, will skip daily pricing moving straight to real-time, interactive pricing.

Legal & General protection marketing director Alan Ferguson highlighted last month that life offices adjusted their prices, whether officially or on the down low, more times in July than in the entire second half of 2006.

This sparked concerns that the industry was heading towards daily pricing. But Kirwan says no. He says the technology is available for providers to use real-time pricing as a tool to manage their volumes and risk and will therefore frog leap over daily pricing.

He says: “Providers could use real-time interactive pricing to balance the policies going on their books throughout the day. If they are not selling enough they could manage volumes by adjusting the price and if they have sold lots of policies to smokers for example they could also adjust the price to manage risk.”

Some advisers say, if providers continue to honour quotes for around a month, real-time pricing would not affect them too much. But others believe it would equal a lot more work and make it harder to treat customers fairly.

Meanwhile Standard Life protection marketing manager Mick James has hit out at life offices that offer proportionate pay outs for critical illness claims where the policyholder has not disclosed information.

He believes insurers could be in for a legal battle or taken to the Financial Ombudsman Service because the proportions rarely reflect the true risk the non-disclosed information would have presented.

He adds most providers do not explain in their contracts that policyholders might receive a proportionate payout nor do they justify why they will pay a particular amount.

James says: “The proportions are entirely arbitrary. I wouldn’t be surprised if consumers that had 80 per cent in the bag started taking these cases to court or to the FOS to get the rest. If a provider is paying out a proportion of a claim it should be explained very clearly why they are paying that proportion. But I don’t think anyone could do that in a meaningful way.”

But Friends Provident insists its proportions are not arbitrary – it reduces the payment by exactly the percentage it would have increased the premiums by had it known the undisclosed information from the outset.


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The pace of change in the pension’s space has been little short of astonishing, and has left thousands of employers struggling to keep their pension policy compliant, and also on the right side of current best practice and governance. Many employers, and indeed many in the pensions industry itself, would like to see a period of no change during the next term of government. This would give all sides a chance to catch up and draw breath. 


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