Legal & General term
L&G offers a range of term insurance options and has revisited their design in a way that should increase their appeal still further (it’s already the biggest provider of term and CI in the UK). The key changes are:
Term only plans for mortgage, family or business protection can now be written up to age 90. Previously the maximum age to which a plan could run was 80.
The maximum policy term is now 50 years.
On terminal illness cover, the final 12 months exclusion has been removed. That exclusion meant that customers were unable to claim in the final 12 months of their policy term. The exclusion has been removed from L&G’s Term Assurance, Critical Illness Cover, Family and Personal Income Plan and Relevant Life Plan products.
To help get the longer term message across, L&G has produced an infographic setting out reasons to consider offering longer life cover.
L&G has also announced that it is no longer using Subject Access Requests for medical underwriting. Instead it now uses a paper Patient Health Report (PHR).
Comment: An ageing population means more people are not only living longer but working longer too. So, for example, demand for mortgages that extend into the traditional retirement years is likely to increase further and the problems of building up a sufficient retirement fund anyway also put more pressure on needing longer terms.
L&G has responded to this need and extended its maximum termination age from 80 to 90. At the same time it has scrapped the unpopular final 12 months exclusion on its terminal illness cover. That was one of those exclusions that make sense to actuaries (if you’re told you have ten months to live in the last year of your policy you might effectively benefit from a longer cover period than what you’d paid for) but which are hard for customers (and advisers…) to think of as fair.
Scrapping the exclusion does have a cost implication to the insurer, but that is countered by avoiding the awful PR of turning down claims because of this exclusion.
L&G was a SARs pioneer but as soon as the Information Commissioner began to investigate GPs’ complaints about how insurers were using it, its days looked numbered. I have mixed feelings on that – using SARS saved insurers money and gave them potentially more information that might help them make a better underwriting decision for the customer. On the other hand it could lead to more ratings and GPs understandably hated getting a much lower fee (compared to what they received for a GP report) but potentially having to do more work. We need better relations with GPs not worse anyway.
All in all, these are useful changes that should help the market leader.
Plus points: L&G has extended its maximum term to age 90 – up by ten years; The 12 month terminal illness exclusion has been scrapped; L&G has stopped using SARs to underwrite; Good marketing support, including a useful infographic on why longer term term can make sense.
Not so plus points: Whole life may be a better option for some; Longer terms do not apply to all term plans (e.g. RLPs are limited to age 75 by law); L&G has stopped using SARs to underwrite.
Website: http://www.legalandgeneral.com/advisercentre.
Rating (max 10): Innovation: 8. Overall: 8. Gold
Tags: Term; L&G