On March 9, we received a letter from David Turner, senior channel manager, protection, at Prudential advising us that their life and critical-illness premium rates were about to increase.
In his letter, Mr Turner promised to “apply old rates to applications received at Prudential before March 10, 2003” and also to cases received after this date that were accompanied by “an illustration dated on or before March 9, 2003”.
However, on April 14, we received an astonishing email advising us that Prudential had “consumed the capacity to write business at current rates” and that “all business which we have not yet accepted will be subject to the new premium terms for life and critical illness.
“In addition, critical-illness premiums will no longer be available on fixed rates, but on a reviewable basis and our new critical-illness definitions will apply”.
The email closes with the admission that Prudential are shelving all pipeline proposals. “No further action will be taken on application forms submitted and not yet accepted.”
It is obvious Prudential has made a number of appalling miscalculations resulting in this humiliating climbdown. It stayed in the market after the competitors pulled out, failed to anticipate the number of applications it would receive and made a promise to underwrite proposals on terms it could not keep.
I telephoned David Turner and asked whether he thought it was acceptable to treat IFAs and their clients in this contemptible manner.
He explained that their decision was “not ideal but was necessary to protect the long-term security of the company”.
However, the real threat to the long-term security of Prudential is its failure to appreciate that IFAs have long memories and that the trust it has destroyed will not easily be regained.
The Mortgage & Pensions Centre, Lowestoft, Suffolk