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The Actuary The magazine of the Institute & Faculty of Actuaries

Turmoil in protection market

The market for traditional life insurance protection – term assurance, critical illness, and health coverages – proved more than usually newsworthy this month with management changes at Prudential and a couple of studies from a reinsurer and a consultant.

Two actuaries resigned from Prudential following apparent problems with critical illness pricing, which had led to questions being asked at the giant insurer’s annual general meeting. Industry sources suggested that a product had had to be withdrawn either because of underpricing or because of difficulties in procuring reinsurance on satisfactory terms (or both).

Noting that long-term sales having grown by 60% in the last five years, ‘The Protection Review’ survey, conducted among 49 of the leading opinion-formers in the sector, reveals four issues of major importance:

  • Regulation/compliance – the rash of previous consultation papers coupled with the imminent arrival of FSA regulation from 2005 for general insurers has left many intermediaries concerned about their ability to devote the requisite time to serving the needs of the market.
  • The reduction in reinsurance capacity and the pricing approach of the reinsurance industry is a major concern for many of the leading product providers.
  • The future of critical illness insurance is highly uncertain as reservations grow about long-term guarantees in an era of rapid medical development. This threatens to undermine the potential of one of the major sales success stories of recent years.
  • There is widespread concern about the tarnished industry image and customer confidence.

More about ‘The Protection Review’ from Andy Couchman (info@andycouchman.com).

‘Term and Health Watch 2003’ covers much of the same ground in impressive detail, and includes articles on each of the major product classes and on the regulatory background, together with useful key statistics. It is available from Lorraine_Sage@swissre.com.