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.
“Increasingly, the price some customers see ‘off the peg’ bears no resemblance to the true cost, once underwriting has been applied. A focus on this market snapshot is no longer helpful in the digital age, in allowing customers to make an informed decision on cover as vital as protection.”
Historical view
This doesn’t seem to be the only reason for the premium decreases over recent years though. To get a true picture of what’s going on, it’s necessary to look a bit further back in time.
Alan Lakey, adviser at Highclere Financial Services and director of CI Expert, explains that the five-year period might be a bit misleading in that the gender directive became law in December 2012 and this was met by premium rises across the board.
This was particularly the case for women who had previously benefitted from lower premiums due to living on average two years longer than men.
“Over 10 years the premiums will have risen,” says Mr Lakey. He adds that insurers gradually reduced their premiums for a number of reasons:
- The increases were “knee-jerk and they were guessing to a certain extent”.
- Better use of technology has allowed profit margins to be retained by driving down costs and therefore premiums.
- Most insurers offer their true low premiums to “first class lives meaning that more clients are loaded than ever before”. Therefore, as indicated by Mr Jeynes above, the low quoted premium may not be reflective of the average premium.
- There is still a “price war” because many advisers continue to promote the cheapest as best as opposed to best value. This is particularly the case with critical illness.
Customer engagement
One of the key developments in the protection market over recent years and, arguably, instrumental in ensuring improved engagement is innovation in product design.
Vitality pioneered the concept of ensuring regular touch-points with health and protection products, outside of a claim, to help ensure they are used and value. Discounts and rewards offered to those who monitor and improve their health help achieve this whilst, at the same time, reducing claims rates overall.
