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Richard Verdin on protection

Life insurance quotes are set to change. Insurers and reinsurers understanding of the circumstances which affect mortality and morbidity, and therefore pricing, have improved, and advisers will have to catch up.

Reinsurer pressure will lead insurers to segment individual risks far more extensively than they do today. This will have an impact on the way advisers quote, and the way customers apply, for life insurance.

With greater segmentation comes greater questioning which means the number of quote parameters will increase. Soon, before providing quotes, you will have to ask your customers for their:Lifetime smoker status – the risk profile of a lifetime non-smoker is different to that of someone who has smoked 20 a day for 10 years and now calls himself a non-smoker, after only 13 months offPostcode – mortality tables exist for the regions and the differences in the UK can be significantOccupationSystolic and diastolic blood pressure levelsDetails of any motoring convictionsHeight and weightOnce you have asked the above, will you be able to provide your clients with a premium they can ‘propose for’? The new business process which follows will also change. Chemical testing will be required for all new applications, with dried blood spots provided by every customer.

This chemical testing for all is becoming economically viable due to advances in technology and because the testing of insurance and job applicants is becoming so widespread that a number of US companies have developed industrial-scale processes. While there is no such scale in UK laboratories, global logistics firms can collect samples in the UK and deliver them to the US the following day with the results emailed back to the UK.

These changes will bring additional problems for intermediaries, not least managing each customer’s expectations around securing the proposed for premium, as chemical results alter insurers categorisation of many applicants after the quote.

Why have these changes not been forced on us already? This is partly due to concerns over the risk of ‘first-mover disadvantage’, particularly in established market leaders, and upsetting the golden goose that is traditional distribution.

However, customers could use chemical testing for their own ends, paying to establish whether they are among the very many that have suffered a silent medical condition that qualifies them for a CI payout.

Today, such tests are expensive for many. However, within the lifetime of most existing policies, the cost could fall to as little as 100 to 150. It is all a matter of time, and my money is on sooner rather than later and certainly within the next 10 years. You have been warned.

Richard Verdin is sales & marketing director of Direct Life & Pension Services

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