At the end of last year, Norwich Union said that it was planning to launch a guaranteed claims pilot. If launched, it will offer policyholders a guarantee that their protection policies will pay out and will be available for an extra £2 to £3 a month. Is this a wise move? Would it work? What do you think of such a product?
Peter Le Beau, Le Beau Visage
Those of us who remember early Monty Python episodes may recall the "Never Claim Policy", which had very reasonable premiums but, of course, paid out nothing in the event of a claim.
People were more sensible then and no one tried to rush it out as an idea to market. I fear that may not be the case now.
Norwich Union's guaranteed claims pilot is a bold move but I must confess it has left me very confused. If a claim is honest and reasonable I do not think it is fair clients should pay a surcharge to ensure it is paid. Presumably this is a sort of tax on the honest policyholder. The people who stand to gain from this are those who have very dubious claims, which it is probably not in the industry's interests to pay.
I suspect the bright people at Norwich Union have put in safeguards against frank non-disclosure but it still seems to me to run totally contrary to the philosophy of utmost good faith.
I have been flippant about the concept, which anyone can see is designed to provide reassurance for customers in the event of a claim. But does it really treat customers fairly to surcharge honest people and does it not show how much we have lost the faith in the public if we have to develop this sort of marketing idea to convince them we are on their side? For once I think the old ideas may be the best.Richard Verdin, Direct Life & Pensions
I have a number of issues with this initiative, which I would describe as inappropriate.
I think this industry, and the big important participants within it, should be focusing on the job of providing reliable life insurance for all. What we should not be doing is developing a two-tier system and certainly not a two-tier system that undermines all those policies already bought and held by customers.
I do not think that 'reliability for some' or a 'premium product' is something we want or need. What we need is insurers applying practices that all customers can reasonably rely upon.
While I appreciate this initiative is still only a pilot, it has the potential to destroy a lot of trust that most existing customers have in their 'already bought' policies.
From a 'value for money' perspective, I think paying up to £900 (£3 x 300 months) for the briefest of initial medicals and a GP report is very expensive and, as an NHS user, I have to say I am appalled at the thought of the possibility of my local NHS services being impacted by having to deal with their share of the additional one million GP reports a year that would be needed to support a general roll-out.
When talking to Norwich Union about this I was left in no doubt that the motivation behind this idea was one aimed at helping customers and advisers, however, I think it fails on both counts.Dave Priestley, PruProtect
As a new provider entering the protection market, it is evident that the lack of consumer confidence is holding back the market from fulfilling its genuine potential. There is no doubt protection products should be more widely purchased and the protection gap is well known and publicised.
The question is how to rebuild consumer confidence. Do we take Norwich Union's approach and offer guarantees in return for higher premiums, or is there a different approach?
We believe the fundamentals of what protection policies consist of need to be brought up to date. If we take serious or critical illness (CI) and disability, consumers' lack of confidence has been driven by the loose categories of cover set out under these traditional CI and disability policies and the lack of innovation from providers. In a market without innovation, the competitive strategy falls back to price, and to survive, providers need to tighten up on claims adjudication and issues such as non-disclosure.
Times have changed. Consumers want much more explicit information about the cover they are buying and they want to know that future claims will be paid. They need to clearly see what they are getting to be prepared to pay for it. I believe that by clearly demonstrating what customers will be covered for and how firms will decide on future claims, we can rebuild consumer confidence.Karin Lloyd, Karin Lloyd
It will be interesting to see the full details of this pilot but I assume they can only guarantee not to decline claims on grounds of non-disclosure and not for any other reason. It is also not clear which types of cover would be included in the pilot so my comments assume that the main focus will be on CI.
I can understand the motivation for wanting to offer people peace of mind in the current climate, although the consumer press could argue this is charging for something the product should do anyway. Could it actually encourage non-disclosure? If the extra charge is covering the risks of less stringent underwriting, it is possible that people with a known history could elect to pay the extra charge rather than go through a full underwriting process.
Does the fee run throughout the duration of the policy or is it designed to cease after a period of time? If it is a long-term fee, there may be issues should the Law Commission review result in the introduction of a non-contestability period. After a period of time in force, people would be paying a monthly fee for something that was no longer an issue.
Perhaps the biggest risk that will have to be managed is reputation. For example, what happens when a claimant, newly diagnosed with multiple sclerosis and currently asymptomatic, has their claim turned down for not meeting the definition? "I paid for a guarantee, now I have multiple sclerosis and they still won't pay me…" would not be a great headline.
