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The Actuary The magazine of the Institute & Faculty of Actuaries

Critical illness rates up

The rates on Norwich Union guaranteed rate critical illness policies were increased with effect from 9 December 2002. This was the first increase in Norwich Union guaranteed rates in the past 18 months and put them back to around the same level they were two years ago. Rates for existing policies were unaffected.

The uncertainty in the future cost of critical illness claims resulting from advances in medical science has led to reinsurers increasing guaranteed terms for critical illness business or withdrawing from the market. These medical advances lead to the earlier detection of illnesses and therefore earlier claims. These factors have in turn led to the increase in cost of critical illness cover.

As a result of the increase in reinsurance rates, new policy premiums rose by an average of around 40% for stand-alone critical illness policies, mortgage life insurance with critical illness, and term assurance policies with critical illness.