The last two weeks have seen an increase in information coming from the insurers regarding the changes to pricing due later this year, with one provider, Ageas, nailing its colours firmly to the mast.
We now seem to have reached the tipping point dividing the advisers that are starting to use the expected price increases at the end of the year to generate business and those who are hedging their bets and hanging in there for more information.
The problem for advisers trying to help their customers by ensuring they get contracts on risk ahead of gender and I – E price impacts are that they really have no idea what the new premiums will be at the end of the year.
As a rule of thumb, I like the LV= approach, recently published, which suggests the gender effect will have the following impact on females – term insurance (+20 per cent), critical illness (+10 per cent) and income protection (-30 per cent), and males – term (-10 per cent), critical illness (-5 per cent) and income protection (+25 per cent).
But it is suggested that the I – E tax changes will have an overall increase of between 10 and 15 per cent. Do not forget income protection is not affected by I – E.
The different pricing actuaries will also have to take into account other factors such as expenses, reinsurance terms and competitiveness to get their full interpretation of the impacts.
So it is a difficult balance in informing customers about the changes and encouraging them to take action now rather than it looking like a pushy “sales” technique to just get a policy on risk quickly.
I do not think the providers will be revealing their new prices until just before G-Day, so we really are not going to know the revised premiums until in most cases it is too late.
Similarly, the actual impact of the gender changes will be interpreted in different ways by each of the life offices, as will their changes to the tax regime. But at the moment we can only make assumptions based on the estimated impact provided by providers such as LV= at their recent webinar, and Bright Grey.
If a 35-year-old female with a protection policy is quoted at £40 a month now for a 25-year policy, an increase of 20 per cent a year will result in that customer paying an extra £2,400 throughout the term of the policy. If the customer wants to proceed, then getting it completed by December 21 has a major financial benefit and customers should be made aware.
The key information missing at the moment is how providers are going to manage pipeline cases, proposed premium changes and confirmation when the contract is actually formed.
One provider has started to communicate effectively about this. Ageas has confirmed that where intermediaries submit an application before midnight on December 20, where they are unable to offer terms without further medical evidence, Ageas Protect will offer to enter into a limited contract with the customer while evidence is obtained. They will be on risk for accidental death benefit but not for other covers and this cover is conditional upon all required information being received by the February 28, 2013.
Over the next few weeks, I am looking forward to more providers confirming their position, giving advisers the opportunity to confidently move into the proactive camp.
Neil McCarthy is sales & marketing director at Direct Life & Pension Services