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Life cover less ordinary

The protection market is changing with the times and our panel consider what impact consolidation of brands, technological innovation and possible change to how gender features in the underwriting process will have on life products

Resolution recently announced plans to acquire Bupa Health Assurance to add to the protection businesses it acquired with Friends Provident and Axa. What does the consolidation of so many brands mean for the market?

Lakey: Apart from the obvious reduction in choice, it could herald a decline in innovation. A buoyant market has to keep moving, whereas a moribund market might sit back and focus on cost or name awareness. Improvements by one provider invariably lead to one or more competitors seeking to catch up or surpass the innovator and this provides continual reinvention.

Of course, this may lead to opportunities for new entrants that identify a niche where they can gain market share, as Fortis has done so cleverly in recent years. The strictures of regulation may cause many a potential entrant to rethink, so the environment is key for attracting new entrants and sustaining existing players.

Morris: There are still lots of brands out there, lots of differences in products and plenty of consumers buying inappropriate cover, so it does not affect the need for advice. Ultimately, we do not want so few brands that competition is harmed but we are a long way off that scenario.

The positive aspect is that major companies have major budgets to grow the market, rather than continuing to fight over dwindling marketshare. The more choice there is, the better all round but the positive is that we may find the big companies ready to make a big impact on consumer consciousness.

Chadborn: The UK protection market has an abundance of life offices compared with other markets around the world. And with so many being dragged into a price war, it is harder to differentiate between brands.

I am therefore not overly concerned to witness the recent M&A activity. Some brands’ existing propositions seem to have a natural fit, such as Axa and Friends Provident. Others, such as Bupa, are strong in their own right and have traditionally positioned themselves in the quality camp, so it is disappointing to see them disappear and hard to understand how they will complement other propositions.

PruProtect is launching a facility to offer life and serious-illness quotes via iPhones or other smartphones. Is this a marketing gimmick or do you think you would use a service like this?

Technology continues to move forward and improve the adviser’s job and progress should be embraced

Lakey: It is always good publicity to be first in the market with some service or other and it may be that such a facility will take off. However, I do think it is premature to imagine any great move towards using this facility. While it might assist advisers on the hoof, it does not seem that much of a step forward, more of a shuffle.

Anyway, why would one need this facility when a laptop can be used to obtain this information from websites and extranet facilities?

Morris: Technology continues to move forward and improve the adviser’s job and this is another example of why progress should be embraced. If it engages more advisers and promotes protection then it has to be a good thing, although the flip side is that it must not further encourage the headlong rush into buying life cover at the expense of FIB and IP. If it is a marketing gimmick, then it is a good one and should make the lives of advisers that bit easier. And, of course, it will help PruProtect sell more policies.

Chadborn: This may initially be perceived as a marketing gimmick but anyone who thinks this will not become the norm is deluding themselves. It will not replace the ease of desktop use but, like any good app, it is simple to use, intuitive and serves as a quick guide to use while on the move. The pipeline tracking is also a helpful feature. It does not surprise me that PruProtect is the first provider to bring such an app to market, or that Space01 is the brains and initiative behind it.

The European Court of Justice is considering banning gender as an underwriting factor for insurance products on the basis that it is discriminatory. What would such a ban do to sales of life insurance?

Lakey: Such a move would be another victory for irrationality over common sense, as with the totalling up of premiums. Theoretically, standardising premiums would push up the cost for females and reduce the cost for male lives. This would dent the ability to rebroke cover and would provide a line in the sand for future reference. Friendly Societies already offer unisex rates for income protection plans, so we know it can be applied successfully.

In one sense, it might encourage sales by simplifying matters – and we know that simple sells.

Morris: It depends on what it does to price. The price of life insurance continues to drop and it seems reasonable to assume this initiative would halt the downward spiral.

I am uncomfortable with the idea of regulation forbidding insurance companies from managing their risk in the way they deem most appropriate. If you can not discriminate – an inappropriate phrase for the lawmakers to use – in terms of gender pricing then perhaps they will also halt health pricing, in which case loadings would not be possible. Overall, there is no substantial gender bias across protection as a whole. Women pay less for life cover but more for income protection and men vice versa. I suspect such a ban would hurt sales but I would be more worried about the Pandora’s box of regulation it opens up.

Chadborn: A ban on gender as an underwriting factor would relate to all financial services products, including life insurance, annuities and general insurance lines such as car insurance – possibly spelling the end of the road for Sheila’s Wheels. The market could adjust to no gender pricing but it is likely that price would rise, meaning sales would probably decline.

Interestingly, the advocate general’s view is that financial reasons, such as an increase in premiums, do not constitute a material reason that would make discrimination on grounds of gender permissible – so all in all, perhaps another dose of euro principles overruling pragmatism.


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