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.