Term premium rates are decreasing overall. Apart from the 2013 gender-neutral pricing reaction, rates continue to decrease at an average of approximately 3 per cent a year.
LifeSearch’s figures show that a 41-year-old taking out level term assurance on a 40-year term and sum assured of £200,000 would have paid £33.20pm five years ago and £29.30pm today.
But, as outlined earlier, reducing prices cannot be the main driver for market growth. It won’t suddenly make the product more appealing to a wider audience. The focus should instead be on engaging more people beyond those already with protection.
This was the raison d’etre for Royal London’s Helping Hand initiative, which gives those customers who experience serious illness, injury or bereavement access to a dedicated nurse who’ll provide tailored support for as long as needed.
Jennifer Gilchrist, proposition lead at Royal London, comments: “Customers may sometimes pay a little more but should feel reassured that they will receive protection that provides more than just a cheque.”
Meanwhile, simplified underwriting is also making life cover easier to buy. This may carry a premium increase to cover increased risk. An alternative to this is point of sale underwriting, allowing decisions immediately whilst still maintaining existing underwriting philosophy and pricing policy.
Critical illness
The CI market saw a 1 per cent increase in total new sales by volume in 2016 to 434,363, but still well below 2012 level, which stood at 560,911.
Average new sum assured sat at £104,585 in 2016, down on 2015’s average at £107,474. Over the same period, average premiums for ACCI increased from £45pm to £46pm and for SACI decreased from £38pm to £36pm.
LifeSearch’s figures show that a 36-year-old taking out level term assurance with CI (no total permanent disability) on a 34-year term and with a sum assured of £125,000 would have paid £50.65 five years ago and £41.21 today.
However, Mr Lakey predicts that the cost of CI plans will steadily rise. “There are numerous pricing concerns with the cost of children’s cover – due to increasing children’s claims and also breast cancer,” he says.
“Factor in the inexorable rise in conditions covered, which will eventually feed though as greater claims, and you have a recipe for increased premiums.”
Income protection
The IP market saw another positive year in 2016 with an increase of 9.8 per cent in total new sales, according to Swiss Re. Total new individual IP sales by volume have steadily increased since 2013 from 90,794 to 117,814 in 2016.
LifeSearch’s figures show that for a 38-year-old, a full-term guaranteed IP on a 3-month deferred period, with a term to age 50 and on a sum assured of £1,750pm would have cost £24.56 five years ago and £18.26 today.
