Einsured Life Insurance

A comprehensive study has found that British consumers feel the insurance industry lags behind others in how it addresses their needs and have given their strongest hint that greater simplicity would be welcomed.

Ernst & Young surveyed 24,000 life and non-life insurance customers across 23 countries, including 2,000 in the UK.

Compared to their international counterparts, British customers find life insurance products too complicated and are willing to switch to providers who are more transparent and communicate better.

Interestingly, Brits are more demanding in their expectations of customer service and rewards for loyalty than consumers from other countries. But there is evidence that customers trust the industry and are willing to pay extra for a recognised stable brand.

Despite being some of the most proactive in educating themselves about the type of products available, Brits still find them too complex. Well over a third of consumers surveyed in the UK found the life and pensions products on the market too complicated and confirmed they would like to see simple and more transparent products.

More than a quarter of consumers in every region surveyed said that they would reconsider switching provider if they could guarantee more transparency on the products and better communication about product performance.

For life and investment product switching the UK matches the global average – around 10% of those surveyed have changed their provider in the last five years, but in the UK this number is set to double with 20% of consumers considering switching provider in the next five years.

While price was the top reason for changing non-life insurance provider (70%), life and pensions providers were primarily dropped for not being able to meet the changing needs of consumers.

Most consumers across the globe believe the insurance industry is trailing in rewarding customer loyalty and general customer service, but this trend is particularly marked in the UK.

The vast majority (84%) of life and pensions customers (and 88% of non-life customers) who had an opinion agreed that insurers trail other industries in rewarding customer loyalty.
This compared to 65-75% of consumers globally.

And three quarters (75%) of life and pensions customers (83% of non-life customers) who had an opinion agreed that service levels in insurance lagged other industries, compared to 60-70% of consumers globally.

This was highlighted by 55% of UK life and pensions consumers saying they were not contacted by their insurer when the policy approached renewal.

Fortunately, customers still trust the industry and satisfaction levels were high, with the UK market scoring 7.3/10 in satisfaction, while 30% of consumers in the UK were also willing to pay a premium for a financially stable brand.

Industry analysts believe that the expectations of consumers are constantly evolving and driven by online information and the rise of customer service standards in other industries. The UK has led the way in the move online, and some of the frustrations being voiced by UK consumers about levels of service, reward for loyalty and lack of transparency around products will be useful for other mature markets to learn from.

Regulators are increasingly focusing on protecting consumer interests, with major new rules being introduced in the EU and many other locations. Insurers that align themselves to a customer centric model will find the transition to the new regulatory environment less painful, and may gain competitive advantage.

Consumers are clearly looking for more contact and are keen for insurers to make it easier for them. Companies that can satisfy this demand will prosper while those stuck in the old ways of the past will fail.

The ‘This is Money’ website has this week been discussing the effect on life insurance premiums on certain lifestyle factors. While smoking has long been known to increase insurance costs, for obvious reasons, now obesity is coming under the same level of intense scrutiny.

Obesity is a huge health risk, linked with an increased chance of heart attack, cancer and diabetes. It is no surprise then that life, health and illness insurers are taking more interest in customers’ weight and setting premiums to reflect the greater medical risks associated with obesity.

In America, insurers routinely ask customers for their body mass index on application forms and British insurers are also turning to BMI as a key indicator. Women who take a size 18 dress are routinely hit with premium loadings, while for many men insurance alarm bells can start ringing once their waist hits 36 inches. In the worst cases, cover is declined altogether.

A BMI of 35 could see a 50 per cent increase in premiums while a BMI of 40 or more could see them double. Premiums last for the term of cover, so it is essential to get the right deal at the start.

According to the World Health Organisation, a healthy body weight is a BMI of between 18 and 25. It classes a BMI of 25 to 30 as overweight while more than 30 is obese. But BMI is not an exact science. There are several factors that will influence the numbers. These include ethnic origin and lifestyle. For example, sports enthusiasts with heavy muscle tissue can end up with a high BMI despite their good general fitness.

There is hope for those erroneously caught up by the broad strokes of the BMI test. Customers who shop around will usually cover her on standard terms, subject to a medical.

Insurers are even more sensitive to BMI for critical illness cover, which pays out a lump sum if you are diagnosed with a particular condition, or for income protection insurance that pays a regular monthly sum if you are too ill to work. Here, those with a BMI as low as 32 or 33 may be asked to go for a medical examination before they will be accepted for cover.

Insurers are particularly concerned about younger people who are overweight. There is more tolerance of ‘middle age spread’. Insurers will charge a 28-year-old with a BMI score of 34 an extra 50 per cent for life insurance, whereas a 48-year-old with the same BMI pays the standard rate for a person of their age.

Shopping for a life insurance policy can be a startlingly frank appraisal of your future health and wellbeing. Customers should look at a high BMI as a warning from the future. Taking steps to tackle the problem could bring down your life insurance premiums and help you lead a longer, happier life.

With the population now living longer than ever before, many of us will unfortunately suffer from or be diagnosed with a critical illness at some point in our lives. However, with the advances of medical science, more and more of us are now surviving these illnesses.

This is where Critical illness insurance becomes important because where life insurance covers you in case you die, it will not cover you should you, for example, have a heart attack, stroke, brain tumor or be diagnosed with cancer and survive. These illnesses can severely compromise your income and may force you out of work and remove your income all together.

Critical illness insurance is a product, designed to give you peace of mind through a lump sum cash payment if the policyholder is diagnosed with one of many illnesses listed on the policy. More illnesses are now covered than ever before.

The UK insurance market is very highly regulated for the protection of consumers. The standardisation of the claims definitions may serve many purposes including increased clarity of cover for policyholders and greater comparability of policies from different life offices. For example, in the UK the Association of British Insurers (ABI) has issued a Statement of Best Practise which includes a number of standard definitions for common critical illnesses.

With a critical illness cover policy in place, you will receive payments to settle any debts, mortgage etc and should you need any modifications applying to your home such as a stair lift etc then this can also be funded by your policy. This eases the financial burden of getting ill, reducing additional stress and allowing the patient to focus on getting better.

Many life insurance policies have the option of Critical illness cover at little extra cost so this is always worth considering when shopping for life insurance. If you already have a life insurance policy than you should enquire about critical illness insurance as you may be able to simply add it to your existing life insurance policy.

The first weeks of 2012 have seen a number of celebrity babies enter the world. After a difficult birth, Amanda Holden has a new baby girl, Hollie Rose Hughes, Rebekah Brooks and her husband Charlie are now proud parents of baby Scarlett Anne Mary Brooks and Sam Taylor-Wood and Aaron Johnson now have a second daughter.

It is not only celebrities either. Studies have consistently shown that this time of year is the most popular for would-be parents to begin thinking about starting their families. It is, therefore, the ideal time for families to consider their life insurance needs.

Even if you’re about to become parents for the first or even second time, it’s important to check you have sufficient life insurance cover. If you don’t yet have any at all, it’s time to consider taking some out. After all, you will soon have dependents and you need to ensure you have cover in place in case the worst should happen to you.

Life insurance pays out a lump sum when the policyholder dies. The money can be spent on whatever you want, but most use it for paying off the mortgage, household bills and ensuring the children are financially secure.

Having life insurance ensures the people you leave behind will be able to cope financially.
Even if you already have cover in place, it’s vital that you take the time to consider whether the level of cover you have is adequate. After all, babies are expensive so you need to make sure you have enough protection in place to cover their needs.

You may even be considering buying a bigger property to make room for your little one, in which case you may have a larger mortgage and again will need to ensure the amount of cover you have is sufficient.

In these times of economic uncertainty many people are seeking ways to reduce their expenditure. However, it is a false-economy to do this through deciding against life insurance or, even worse, cancelling an existing policy. Life insurance is at its cheapest level in years and policies can start from as little as £5 a month.

The idea of sacrificing the future financial stability of your family in favour of short term luxuries should be abhorrent to any parent. Ensure your children and partner would be provided for if the worst was to happen to you and ensure you have adequate life insurance cover.

A report released in the last week by Aviva Family Finances has found that, whilst 50% of families are happy to pay for a satellite television package, just 40% have life insurance. This comparison is at once fascinating and troubling.

It is understandable that the majority of UK families find it difficult to discuss personal finance matters and their own mortality and so avoid the issue of dealing with what would happen if the main income earner was no longer able to earn.

As a result, many families ignore the issue and fail to appreciate the value of protecting their family, compared to spending on other items.

It seems that families are more likely to have insurance for their mobile phone than insurance that will protect their family financially if they were to suffer a critical illness. Equally, more people have taken out an extended warranty on electrical items than have income protection insurance, which would potentially pay an income for life should they be unable to work as a result of an accident or illness.

With inflation, pay freezes and benefit cuts hitting families, most are trying to save money this year as well as pay off their debts. However, many misunderstand the value of protecting their families financially. More see booking a summer holiday as a higher priority than buying life insurance.

No-one likes to dwell on poor health or mortality, but by denying that illness – or worse – is even a possibility, people are stopping themselves putting measures in place to protect their loved ones.

Too many people assume that someone else will step in and look after their families if they weren’t there to provide for them, but the reality is very different. People need to ask themselves just how they would pay for their accommodation, their food, and all the other costs of living, should they suddenly lose an income.

While no-one likes to think about ‘what ifs’, by not even considering these scenarios, people could be putting the future financial security of their families at unnecessary risk.

Many customers report feeling ‘peace of mind’ when they take out life cover, knowing their affairs are in order, so families are urged to overcome their taboos and consider whether they need to put protection in place.

With household budgets stretched, one of the first things cut by many is insurance. Some insurance, such as buildings or car insurance is essential. Others range from highly desirable to perhaps just desirable or nice to have.

Life insurance fits in the highly desirable category. It will give you peace of mind and provide for your family if you are suddenly and unexpectedly unable to do so.

If you are about taking out Life Insurance in the New Year you will be keen to sign up to the right policy. But getting it right is no mean feat, especially when there are so many protection plans available and plenty of pitfalls to be aware of. Before you go looking for a policy, it’s worth ensuring you are well versed in the basics of life insurance. Here are a few of the top tips for getting the right life insurance policy.

Don’t assume you won’t need life insurance. It is a way of protecting those of us with major responsibilities should we lose our income through unemployment or serious illness. And even if you are covered for death in service through your employer, you should not rely solely on this benefit.

There are a variety of different life insurance policies available, and your own personal circumstances will dictate which is most suitable for you. It’s not just those who have no dependants who assume they do not need life insurance.

Don’t forget about or ignore your policy. Simply taking out a life insurance policy is just half the job, unfortunately. Once you have signed up, you’ll need to review the plan regularly to make sure it’s still relevant to your circumstances.

There are a raft of scenarios which can occur in your life which could make a difference to your premium and any potential claim you might make. Anything from remortgaging your house, to taking on other debts, or from starting or increasing the size of your family to quitting smoking will all effect your life insurance.

Do not protect just one earning family member. A mistake made by many people taking out life insurance to protect their families is to buy cover for the main breadwinner only. This is a common error made when one parent in a family is the sole breadwinner and the other stays at home to look after young children. However, the death of either member of a partnership would have serioud financial implication that you want to be protected from.

Be wary of Over-50 plans. These plans are available for people who have no life insurance or financial provision for family members when they die. Customers pay monthly premiums and provided they have contributed these for at least one or two years – depending on the provider – their family will receive a fixed sum upon the policyholder’s death.

On the plus side there are no medical requirements – the provider will not ask about your health, so they are a good option for those with serious conditions. On the other hand a certain amount of caution should be applied as research suggests these plans could leave pensioners short by thousands of pounds.

Consumer group Which? found, on average, a 60-year-old man paying £15 a month into a plan for 30 years would earn a lump sum of £2,980. Yet, by putting the same amount into a cash ISA with a rate of four per cent he could earn more than three times that amount, £10,313, over the same timescale.

Which? branded the plans as bad value. It said if customers stopped payments they would forfeit a payout or even the return of their premiums. And if inflation were to follow the same pattern over the next 25 years the real value of some plans by January 2037 could be less than in today’s money.
Finally, always seek financial advice. You will have a better chance of avoiding the mistakes by seeking advice from a professional. If you are going to get help, make sure it’s from an independent financial adviser as opposed to a ‘tied adviser’ who works for a company selling life insurance.

Hello all and welcome back from the Christmas and New Year break and, of course, welcome to 2012! It is traditional at this time of year to offer predictions of what is in store for the coming twelve months, so here is a round-up of the various forecasts for the UK Life Insurance market in 2012.

Life insurance is a very cost sensitive product here and premiums have been coming down steadily over the past decade because the UK is a very competitive market. It has also become much easier for consumers to make their own price comparisons online over that time.

However, the coming year is likely to see an end to that downward trend. The big event looming over the protection market is the introduction in December 2012 of “unisex” pricing.
This means that women (who currently pay less than men because they live longer) will have to pay higher premiums on life cover policies, while men may pay slightly lower ones.

The Association of British Insurers suggests that women may face a rise of up to 20% on life cover, and men could see a fall of 10% when firms start to implement these changes ahead of the new regime.

But when it comes to income protection (IP) policies, which provide a regular income if you’re unable to work for an extended period, the advantage works the other way. Men are less likely to have to take extended sick leave, so their IP premiums are currently much lower – only around 60% of women’s – but they will rocket upwards as a result of the new rules.

Some analysts have suggested that what could be seen is a situation where all prices rise, as the insurance companies attempt to recover the costs associated with moving to the new risk model.

Those costs could also mean some marginal insurance companies give up and get out of the market altogether.

Term assurance (used to provide cover for mortgage) and critical illness policies may see an additional premium hike in the coming year, because of a change in 2013 to the way providers are taxed. Consumers may find themselves paying an extra 10% to 15% more on premiums as a result.

The combination of tax and gender rule changes is likely to mean some hefty price rises towards the end of the year.

However, more generally there’s a continuing trend towards “preferred life rates”. This means that some insurers trim their headline premium rates but increasingly keep those good rates only for the fittest, lowest-risk customers while applications from less healthy individuals are penalised.

Finally, the government is keen to see more consumers with a sensible amount of financial protection, and to that end wants to introduce “simplified” insurance products that will be easier to understand and buy.

A steering group is currently working on what they might look like, and it’s possible some may be available by the end of 2012.

It is important that readers note that predictions of all kinds are notoriously unreliable. Always find out the current situation before committing to any life insurance product and, if in doubt, consult independent financial advice.

A mortgage is the biggest financial commitment most people will ever have. However, life insurance can be very low on people’s lists of priorities when they are in the process of buying a home.

For those buying a home and taking out a mortgage, life insurance can be an important purchase and most lenders will insist that borrowers take out some form of protection.
Along with general family protection, one of the most common reasons for taking out life insurance is to protect a mortgage loan.

Life insurance may seem like an unnecessary additional cost but it is worth considering seriously. This can be particularly crucial if borrowers have family or other dependents, as it can make sure that they can keep a roof over their heads in the event of the borrower’s death.

In the event of a claim during the term, the life insurance company will pay the policy holders beneficiaries or dependents the sum assured as a tax free lump sum. In short this type of insurance is not that complicated, it is designed to payout a lump sum amount that is sufficient enough to repay a mortgage debt should the policy holder die within the policy term.

The key options to consider for life insurance cover is the amount of cover a borrower would like and how long the policy should run for. It makes sense to set the amount of cover equal to the amount of debt outstanding on a mortgage and the term length equal to the amount of time the mortgage has left to run.

Monthly payments for these policies are usually relatively low, for example: The Co-Operative charges £13.39 a month, where as the HSBC charges £10.50 a month. These quotes are based on £100,000 life cover for 20 years level term, for a non smoking male aged 35 and in normal health.

Many mortgage lenders and brokers are likely to offer life insurance when a potential home buyer takes out a mortgage with them; this however is not always the cheapest option. According to new research less than a fifth of Britons felt they needed help purchasing life insurance.

There are different types of policies and they work in different ways, e.g. Level term assurance, this means the amount covered will remain the same throughout the duration of the policy. Decreasing term assurance, on the other hand, means as the outstanding loan gets smaller the amount covered decreases too.

Most policies may also include a terminal illness benefit which means that if the policy holder is diagnosed with a terminal illness then the policy will still pay out on death, even though the insurer knows beforehand that they are ill.

A wavier premium is also sometimes included in a policy for free, which means if a policy holder became involuntarily unemployed or too ill to work then the life policy payments would still be paid even though the holder may be unable to do so themselves.

As with all financial services consumers are advised to do the research before committing themselves and, if necessary, consult independent financial advice.

A new survey published this week has suggested that many people in Britain don’t fully understand what is on offer from financial products in the UK, with Life Insurance proving especially problematic.

Conducted by Gocompare.com, the price comparison website with the annoying but effective adverts, the survey found that the average British person is confused by the various forms of insurance, credit cards and debts in particular.

For example, 44 per cent of people believe that life insurance does not pay out for suicide when, in reality, suicide is usually covered by policies that have been in place for a year or more, although different providers will vary.

Furthermore, 18 per cent of those questioned think that their credit card debts are wiped when they die. Unfortunately, this is not the case and an individual’s estate will actually be required to pay before any assets can be passed on to the beneficiaries.

Commenting on the survey results a spokesman for Gocompare.com said, “No one likes to think about what will happen when they die, particularly if it’s before reaching a ripe old age, but you owe it to those you’d leave behind to ensure they aren’t left in a financial mess when they are trying to pick up the pieces after your death.”

Campaigners have pointed to the results of this survey as yet more evidence that basic financial education should be included on the syllabus of secondary education as one of the life skills required to cope with the modern world.

Analysts have said that, whatever the implications for the future shape of education in schools, everyone purchasing a financial product should research the market first, read the small print of what they are being offered and take independent financial advice if necessary.

Those people who have life insurance should update it if their circumstances change, most especially if their number of dependents grows through the birth of children or grandchildren. However, customers should be careful not to over reach and must keep up their premium payments or else the lump sum benefits could be forfeit.

The government has responded to its consultation on the removal of a range of tax reliefs and confirmed that it will remove tax relief on life assurance premiums in the 2012 Finance Bill.

The decision comes as part of the publication of draft clauses for the financial bill, which was published on 6th December and follows on from the Chancellor’s Autumn Statement.

Under the current rules, UK residents who pay regular premiums under life insurance policies issued before 14 March 1984 are entitled to income tax relief of 12.5 per cent of the premium.

The government has previously removed similar relief for policies issued on or after 14 March 1984, but those taken out before this date are currently still eligible for relief.

In the overview of its draft financial bill, HM Treasury claimed that the relief is “obsolescent”, but that it “still requires long and complex legislation although the average value of the relief per policy is minimal”.

The proposed changes will include those premiums paid by employers under employer-financed retirement benefit schemes.

The repeal of this measure will save the Treasury an estimated £5m in 2015-16, according to the initial findings, although the final costing will be set out in the 2012 Budget.

Analysts have suggested that the figure of savings for the Treasury has been over-estimated given that the average amount claimed per policy per year is just £14.

The costs of repealing this tax relief could, however, hit policy providers hard, as they will have to contact policyholders and make changes to IT and collection systems.

According to the Treasury statement, one industry representative body estimated the cost to each provider as ranging from £100,000 to £200,000.

Presuming that these costs are wholly or partly passed on to consumers then this small change could have price implications for the entire Life Assurance market.