The outlook for protection insurance premiums

  • To understand what is driving premiums down.
  • To be able to list different types of healthcare products.
  • To ascertain how to advise clients with different protection needs.
The outlook for protection insurance premiums

Protection premiums have generally decreased over the years and, perhaps relatedly, sales are on the rise for life insurance, income protection (IP) and critical illness (CI).

Things are not quite the same for health cover but considering we’ve seen three consecutive increases in Insurance Premium Tax coupled with the ongoing impact of medical inflation, this should come as no surprise, more of which later.

Back to life, IP and CI for now. According to rate comparisons provided by independent protection adviser LifeSearch for the purposes of this column, over the last five years, premiums have generally decreased across these different product types and across a range of customer ages. 

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Data from Swiss Re’s Term & Health Watch 2017 report shows that across all these same product types, sales decreased between 2012 and 2013 and then showed a steady increase from 2013 to 2016 (the most up to date statistics available from Swiss Re).

While encouraging, Swiss Re cautions against celebrating just yet, stating there is much work to be done yet to ensure that more people get the coverage they need.

Similar analysis from Equifax Touchstone, showed that protection product sales in Q2 2017 rose by 4.9 per cent on the previous quarter, reaching £147.1m, the highest level in five years. 

Their data, which is collated from 22 protection providers, with inputs from more than 11,000 advisers, reveals that mortgage term policies grew most during the quarter, up by 20.7 per cent on Q1 to £26.2m. This was followed by critical illness policies which experienced a 15 per cent increase to £4.5m. 

In addition, income protection, decreasing term with critical illness, and relevant life policies all performed positively, with sales increasing by 11.1 per cent, 10 per cent and 8.7 per cent respectively. 

A picture of premium decreases and sales increases is undoubtedly attractive. Whether the two aspects are linked, however, remains open for debate.

According to the experts we spoke to, the increases in sales may have less to do with quoted premiums and more to do with better products, improved customer and adviser engagement, plus the marketing advantages that come with digital enablement. In other words, getting the right products in the right place at the right time to an appropriate audience.

Now you see it…

Premiums might be playing a part, but it seems that what you see is not necessarily what you get. 

Phil Jeynes, head of sales and marketing at UnderwriteMe, says that the rise in popularity of online comparison sites has played a large part in the decrease in life insurance premiums. 

He comments: “Customers can see a snapshot of the market on one screen and this puts commercial pressure on insurers to put their best foot forward when it comes to price. 

“It would be interesting to see what the real price looks like for clients, however, since what we see here is only the ‘standard’ price, which doesn’t take into account any medical conditions, occupation, or lifestyle factors.