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Policy to offer payout pledge

Lifesearch is in discussions with life companies about creating a protection policy that is guaranteed to pay out.

Head of protection strategy Kevin Carr says there is a gap in the market and claims many clients would be willing to pay extra for the peace of mind of knowing their policy will not be declined for non-disclosure.

Carr, who would not name the companies involved, says a doctor’s report and a full medical would be required, costing £150-£200, and the underwriting time would increase. But he says that clients would be prepared to pay £3 or so more each month to cover the cost.

Lifesearch hopes to test the product with 50 people, which Carr says will give providers time to assess costs.

He says: “A guaranteed protection product would bring a huge boost to consumer confidence. We know that consumer trust and the industry’s reputation are two of the biggest issues facing the protection market today and giving customers the option of being underwritten up front, with a guarantee that claims would not be declined for non-disclosure, would also keep the Law Commission’s proposals at bay.”

Bright Grey product director Roger Edwards says anything the industry can do to reduce the problem of non-disclosure has to be considered but points out that since a lot of policies lapse, providers would more realistically spread the cost over 10 years rather than the full term, which would make the product more expensive for consumers.

Edwards also fears that the industry’s obsession with price may stifle such a product. He says: “Companies could just cut rates and then it comes back to price again. The infrastructure needs to be altered so people do not revert back to something cheaper that does not have these features.”

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