The Exeter has launched into the protection life insurance market, with a new plan designed to appeal to two groups who often struggle to get affordable cover – those who are overweight and those who have Type II diabetes (and many will have both).
Managed Life offers reduced premiums in future years for customers who positively manage their condition by lowering their HbA1c level (if they are Type II diabetics) or their weight (if they have a high BMI – body mass index).
To best understand how the plan works, the timeline for a new plan is:
First, an initial underwriting decision is given and the policy goes on risk.
- A future control measure target is set – either BMI or HbA1c level. Higher and lower thresholds are set.
- Each year the customer provides evidence of their results against the target on a self-certification basis.
- Each year if the lower threshold target is reached, the customer’s premium will fall.
- If the higher threshold is exceeded, the premium will increase.
- If the target weight or HbA1c level is between the upper and lower thresholds, the premium stays the same.
- So, a customer could end up paying up to 35% less for their insurance if they constantly beat their lower threshold target.
- But if the customer’s numbers worsen and he or she consistently exceeds the upper threshold, a maximum premium limit applies and so the downside (extra cost) is limited.
- The Exeter relies on self-reporting regarding achieving the annual targets, but does audit a random sample every year to protect all members’ interests.
Key features of Managed Life include:
- The plan is single life cover only, albeit with discounts for two linked life policies e.g. for partners (it can be argued that most people are better off with single life cover anyway).
- The plan is available to UK residents aged 18 to 80 inclusive.
- Quotes are through the IRESS system. A rules-based application journey uses dynamic questioning to gather information.
- A delegated underwriting system means an adviser can send a particular application question to their client to complete and return direct to The Exeter. This can be useful if sensitive information is required.
- Terms are from five years up to 50 years (cover must end before the customer’s 90th birthday).
- The maximum cover is £3m; minimum is £20K. Minimum monthly premium is £15.
- Cover can be level or decreasing (when the sum falls in line with the capital outstanding on a repayment mortgage at an 8% interest rate).
- Terminal illness benefit is included as standard.
- Accidental death benefit is included.
- There is a mortgage-free cover benefit.
- The confidential support service Exeter Assist is available on all policies, and there are also a GP helpline and a private prescription service.
Comment: The Exeter has built a good name in the IP and PMI sectors but has not previously offered straightforward term life cover, so its move into this area is interesting. Rather than try to compete on price (a strategy that has arguably damaged the industry rather than truly benefited customers) it has aimed to come up with a better mousetrap. This is in the form of using dynamic underwriting – where the insurer and customer enter into a rolling agreement whereby the customer benefits financially in future if they can achieve pre-set health targets – and rather than target the whole population, it has just targeted Type II diabetics and the overweight.
Previously the typical customer journey meant ‘buying’ based on an attractive ‘quote’ but then having to undergo a lengthy (it could be many weeks)underwriting process and then often finding that the final price bore little relation to the upfront teaser. Given how hard we have made it for people just to buy our products, is it any surprise that they expect the process to claim if needs be to be even tougher? It’s perhaps no wonder we’re not trusted to pay out on claims – even though the industry’s record on paying claims is actually very impressive.
Dynamic underwriting does mean having to provide evidence to the insurer annually but this is cost free, simple and The Exeter sensibly allows self-certification, but backed up by random sampling. If you’re a member of a professional body such as the CII or PFS, that’s a process you’ll be used to anyway on your CPD, and that’s just how The Exeter is treating its customers.
The product itself is simple term and that includes terminal illness benefit. Including accidental death benefit is a bit of a gimmick (why would your family need more cover if you die by accident rather than illness?) but it’s included at no extra cost so if the price is competitive anyway, that’s simply a bonus.
The Exeter’s model lends itself to other consumer groups in future, but the insurer has wisely started with just two groups – albeit significant in their own right. In an ideal world, customers would probably prefer a low cost option, where the premium starts low but increases in future - so doing it the other way round won’t please everyone, but dynamic underwriting is quite simply revolutionary and we welcome this very exciting development.
Plus points: Targets Type II diabetics and the overweight and offers quick decisions, simplicity and a financial incentive to manage their condition better; Annual compliance is simple, but still with safeguards to protect all members; Scope to offer this approach in future to other groups; Good range of product features and design.
Not so plus points: Not available for Type 1 diabetics; Premiums rise if the upper threshold is exceeded; Accidental death benefit is rather gimmicky.
Rating (max 10): Innovation: 9. Overall: 9. Platinum
Tags: Term; The Exeter