Virgin got 2006 off to a controversial start by launching its Big V cancer-only cover administered by Scottish Widows which brought widespread criticism from the protection industry although a few commentators welcomed the innovation.
Aegon Scottish Equitable was one of the first providers to announce it would be launching a simple pension term assurance product after A-Day – a move which it must now be regretting along with all the other PTA providers. Norwich Union, HSBC and Scottish Provident followed suit in May.
Pension term assurance launched with more of a small pop than a bang after A-Day but lasted a mere eight months due to the Chancellor’s pre-Budget report indication that the tax relief on PTA will be withdrawn in the Budget next year.
Money Marketing continued its No Advice No Protection campaign and Liberal Democrat small business spokeswoman Lorely Burt tabled an early day motion in March to put pressure on the Treasury and the FSA to address the possibility of large-scale misbuying of protection products.
In February, Defaqto reported that the critical-illness insurance industry needed to work harder to improve consumer trust and understanding of the product.
This was followed by the Association of British Insurers setting up launching a protection committee to replace its working parties on critical illness and income protection.
Critical-illness cover stayed in the spotlight as the FSA published its CI review in May which included a mystery-shopping exercise which found that firms selling CI cover need to demonstrate a better understanding of the product and show they are treating customers fairly.
In June, Bright Grey chief executive David Robinson announced that he would be leaving the company which was his brainchild.
Prudential launched a flexible protection product in the summer which covers over 120 conditions. This was met by a storm of criticism despite providers and advisers constantly calling for innovation in the market.
The headlines were dominated by payment protection insurance later in the year after the Office of Fair Trading released a damning report into the sector which found that product providers are making massive profits on the back of low claim ratios.
The price war continued intermittently throughout the year, with providers all playing follow my leader and a record of five rate cuts in just one week in November.
The ABI released its new critical-illness definitions giving providers until April 2007 to implement the changes. Swiss Re challenged the inclusion of two cancer definitions in October in the light of new medical evidence and this led the ABI to alter the definitions in December.
An income protection White Paper was launched in December to try to inject some life back into the ailing product. But the shock of the year was the withdrawal of tax relief on PTA which knocked the industry sideways in the pre-Budget report in December.