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The year in protection

Insurers got the year off to a good start by guaranteeing to pay out more claims for protection insurance in cases of non-disclosure.

Where relevant information has not been provided non-deliberately, insurers said they would pay customers a fair sum, reflecting risk and premiums paid.

But Payment Protection Insurance continued to let the protection industry down as the FSA fined HFC Bank £1m for failing to give suitable advice to customers buying PPI.

Following pressure from the British Insurance Brokers’ Association, the FSA said it would review the Insurance Conduct of Business rules for insurance comparison websites.
In late January, the industry mourned the death of Dr RDC Brackenridge who was a pioneer of medical underwriting.

Friends Provident showed its commitment to the protection market when it announced it would be concentrating on the life and pensions and protection markets, a moving away from the wealth management side of things. The life office appointed protection and actuarial manager Mark Jones as head of protection marketing as part of the restructure.

Bright Grey launched a new business protection product in February which covered key person, loan protection and ownership protection as well as key person income cover for sickness.

Axa cleaned up at this year’s Lifesearch protection awards winning six out of 11 possible categories including best overall provider.

Legal & General bagged the best service provider and best e-commerce provider this year after cleaning up last year, taking home six awards.

The best critical illness provider, best income protection provider and best marketing and communications categories were won by Bupa, Pioneer and Aegon Scottish Equitable respectively.

In March, before its financial difficulties emerged, AIG recruited former Munich Re head of protection marketing Will Adler to the role of protection product and planning actuary. This sparked rumours that the insurance giant would be focusing on the individual protection intermediary market for the first time.

Meanwhile, Unum launched a dual benefit group income protection product. The product aims to help businesses cope with staff being off work due to illness by paying income benefits to both the employee and employer.

A spat broke out between Lifesearch and the Association of British Insurers when it emerged that only 6 per cent of insurers and reinsurers believe that the ABI does a good job in representing its members. The survey carried out by Lifesearch, asked whether the ABI could improve on how well it reflects the views and needs of its members. But the ABI said it did not think Lifesearch’s finding reflected reality.

The rise of tele-underwriting continued with Lincoln Financial Group and Pioneer becoming the latest providers to sign up with tele-interviewing specialists Morgan Ash.

The protection industry played musical chairs in mid-March when Royal Liver IFA market manager Andy Milburn announced he would be exiting the industry after nearly two decades by going to Goldsmith Williams as head of marketing.

Other moves included Standard Life former head of marketing Mick James leaving to take up a role at RGA and Paul Cowman of Just Retirement left the equity release provider in pursuit of new opportunities.

Scottish Provident was referred to the FSA and the ABI by Exchequer Secretary to the Treasury Angela Eagle after its treatment of a cancer victim was highlighted in Parliament.

Labour MP for Wansbeck Denis Murphy brought his constituent Susan Hurrell’s case to Eagle’s attention during an insurance industry regulation debate.

Hurrell was told twice that she did not have terminal illness cover under her Scot Prov life insurance policy after being diagnosed with ovarian cancer in December 2004.

But in September 2006, after renewing the policy, Hurrell discovered that she did have a terminal-illness clause, which meant she would be paid in full as long as she was given less than 12 months to live at diagnosis.
ScotProv admitted its mistake and apologised but said she was not eligible for a payout because she did not die within 12 months of diagnosis. Hurrell’s doctor wrote to the insurer confirming that her life expectancy at diagnosis was “certainly less than 12 months”.

MorganAsh announced it was set to begin tele-interviewing claims from April. Instead of claimants filling out a claim form, a trained MorganAsh nurse will call them to determine their medical and financial situation. MorganAsh then produces a report and based on this the provider will either make a payment or investigate the claim further. It expects to turn around claims in two to three days compared with the month it takes most providers to deal with claim forms.

Fortis said it would be pushing back its highly anticipated entry into the UK protection market until May.

PruProtect boosted the commission on its severity-based critical illness cover product by 20 per cent last week to reward advisers for taking the time to study it. But the increase in commission had mixed responses from the industry with some claiming it would only drive commission-based advice.

Bright Grey celebrated its fifth birthday and released its claim statistics for the first time. It paid out 85 per cent of life claims and 82 per cent of critical illness claims in the past 12 months.

Gordon Brown launched a consultation into the funding of social care in May, after admitting the system needed radical reform. Meanwhile Asda launched a new over 50s protection policy which promises policyholders they will never pay in more than they get out.

Gloomy news from Swiss Re as the reinsurer released its Term & Health Watch which painted a depressing picture of the state of the protection market. The saddest news was that income protection sales dropped 14.3 per cent in 2007 compared with 2006. Critical illness sales were also down 8.2 per cent from 2006.

LV= launched a hybrid income protection and mortgage payment protection insurance product in June. The product pays out until the policyholder goes back to work, the plan term ends or the policyholder dies which is unlike most MPPI plans which are short-term.

The Law Commission announced it would be updating Insurance Contract Law after its proposals to reform the outdated legislation won overwhelming support from the industry. The proposals would bring the law into line with the FOS’s approach to handling claims.

But the ABI argued strongly against reform stating that “there is no widespread evidence of consumer detriment and the need for reform is therefore not evident”. The trade body encourages insurers to follow the FOS approach in guidelines introduced in January but does not believe this should be written in law.

The PPI saga continued with the news that the Competition Commission was considering banning PPI from being sold at the point of sale of a credit product. While the FSA launched PPI comparison tables in a bid to help consumers shop around for the product.

Prompted by the EU’s gender directive, which was transposed into English law in April, the ABI helpfully published data tables in June to allow insurers to continue to use gender as a factor when pricing policies.

Under the new legislation, insurers can only take gender into account if the differences are based on accurate and regularly updated published data. So the ABI released tables for life insurance, income protection, critical illness and private medical insurance as well as annuities and car insurance.

More musical chairs as Andy Milburn left Goldsmith Williams after just a couple of months and joined Munich Re as its new head of marketing for the UK Life branch.

July also finally saw the launch of the Fortis life insurance business after many delays. Fortis teamed up with Lifesearch to launch Real Life Cover which combines seven different types of cover. The second product from Fortis is Your Life Plan which is a menu-style protection plan.

Norwich Union also unveiled a new product called Income Protection Solutions for the intermediary sales channel.

Not wanting to be left out, Royal Liver announced it would be following in the footsteps of Fortis by launching its own real life cover plan. The product was to be developed with Lifesearch.

And more moves as Direct Life and Pensions Services sales and marketing director Richard Verdin announced he was leaving the firm after six years to join Norwich Union as director of marketing, protection.

Another big hitter moved in August – Lifesearch head of protection strategy Kevin Carr announced he would be moving to the dark side by joining PruProtect as its director of protection development.

The ABI replaced it total permanent disability regime with six medical definitions in a bid to simplify the wording.

The Income Protection Task Force continued its important work by confirming that its second white paper on IP sales would be submitted to Parliament by December.

September brought news that the ifs School of Finance was to offer the certificate in long-term care insurance in a bid to boost the number of advisers recommending LTC products.

News of the Lloyds TSB/HBOS merger threw up questions of whether two similar brands could share the same protection space or not.

In October, 11 of the UK’s leading health insurers united to form a fraud intelligence system to support the Health Insurance Counter Fraud Group’s fight against healthcare fraud.

The group, which secured the support of the Association of British Insurers, hopes to stamp out fraudulent goings-on using its data-sharing system.

Alliance & Leicester emerged as the latest culprit of PPI misselling tactics as it was ordered to pay £7m to the FSA in fines – the third biggest ever penalty handed out by the regulator.

Axa made moves to restore confidence in the insurance industry by launching a £4m advertising campaign with Saatchi & Saatchi. This move came after Lifesearch called for the industry to unite and fund a hard-hitting campaign to highlight the importance of income protection.

Bupa went live with its tele-interviewing pilot while news that unemployment levels looked set to soar in 2009 received a mixed reaction. Some in the industry saw this as an opportunity to review protection cover with their clients and many predicted that sales of unemployment cover or income protection cover could receive a boost as a result. But there were also concerns that consumers would allow many protection policies to lapse as the credit crunch began to bite.

In late October, Fortis teamed up with Click to offer Click for Life cover while the changes in the Welfare Reform Act made their way into UK law. Incapacity benefit for new claimants was scrapped in favour of employment and support allowance, designed to give people the support they need to improve their health, skills and look for work.

In November, the Government moved to allow top-up funding for drugs not available on the NHS. This led to speculation that more insurers may jump on the health insurance bandwagon and launch new products to rival traditional private medical insurance.

Exeter Friendly Society launched its Health Cover for Me plan to the whole of market after completing a pilot with IFAs. The product offers unlimited cover for cancer, home nursing and private ambulance.

PPI ended the year as Egg was fined £721,000 for serious failings in its sales of credit card PPI. The Competition Commission confirmed that advisers and brokers would be included in the proposed PPI point of sale ban while Treasury Select Committee chairman John McFall revealed he had personal experience of pressurised PPI sales after his bank sent him eight letters trying to persuade him to take out a policy.

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