VitalityLife LifestyleCare Cover
VitalityLife is the new name for what was PruProtect and to mark the occasion it launched no less than three new plans on 19 November.
This product is a whole of life plan (with serious illness cover, income protection and other optional add-ons), but with a separate benefit that in effect usually accelerates some or all of the sum insured if the customer needs long term care (LTC). The plan is coupled with Vitality benefits to encourage and reward good lifestyle choices too. A term version is also available, but not with the Lifestyle Care option.
If the customer has what VitalityLife calls a Severity Level 1 condition (essentially, irreversible Alzheimer’s, Parkinson’s or dementia), 20% of the LifestyleCare Cover sum insured is paid. The life sum insured is then paid on death or on suffering a Severity Level 2 condition (usually the balance, but if LifestyleCare Cover Protector is chosen, the full sum insured is paid).
If the customer suffers a Severity Level 2 condition, the whole balance of the LifestyleCare Cover sum insured is payable. A Level 2 condition is one where there is a persistent confusional state, a severe stroke resulting in permanent symptoms or a permanent inability to perform three out of six tasks ‘designed to assess whether you can look after yourself ever again’.
The customer must usually survive for 14 days after meeting a Level 2 claim definition.
The plan is available from age 16 to 74 at outset, with a maximum sum insured of £250,000 and a minimum of £10,000.
The third part of the plan is the Vitality incentive and reward scheme. This enables customers to build up points for positive lifestyle choices, coupled with discounts for a range of items including gym membership.
Comment: Anew trend emerging in protection insurance is adding long term care benefits as an option and it’s one we welcome very much. Previous attempts to offer such benefits largely failed on a pre-funded (i.e. before care was actually needed) basis for a variety of reasons, including the fact that they simply didn’t sell as well as we had all hoped (and expected). Moreover, claims turned out to be higher than anticipated, often because if you take away people’s financial concerns but give them top quality care, they tend to live longer (a fantastic result but costly to insurers). However, the underlying need remains and if anything is even stronger today than it was in the late 90s heyday for the then embryonic LTCI sector.
The ideal solution is to get a regular monthly income if you need care – because that is exactly what the financial need is. However, such solutions are expensive (typically they were more than twice the cost of an equivalent income protection plan a customer may have bought during their working life), the rules around long term care are complex and, quite simply, people won’t buy the ‘best’ solution unless they are convinced it is affordable, good value and highly desirable.
VitalityLife’s (a good name incidentally) solution is instead to provide an accelerated life benefit – in a way mirroring the approach taken with critical illness insurance. It’s not a perfect solution – people with conditions such as Alzheimer’s tend to need most care for longest, yet this plan only pays out 20% of the sum insured (unless they progress to being in a permanent confused state). Also, the old ADL based definition didn’t help in the many situations where an elderly person was say very frail and almost but not quite failed enough ADLs (as we found out back in the 90s).Getting a lump sum is useful but an income would be even better as actual need is simply monthly need x number of months needed (which can only ever be guesstimated). That said, if VitalityLife offered that, the cost would go up, the underwriting hurdles would be even higher and fewer people would buy.
The other factor is that, from 2016, the Government is changing the rules to introduce an element of capping, so maybe a lump sum makes more sense – or will from then.
The website says ‘Our LifestyleCare Cover pays out if a doctor agrees that you can’t look after yourself’. In practice, it’s a bit more complex than that, but VitalityLife has certainly improved on the old ADLs plus cognitive impairment definition of the 90s. Even so, we are not sure everyone needing long term care would actually be covered by the definitions, so perhaps a simple overarching definition as set out on the website would help allay any fears there.
One area that seems to be missing too is some form of one to one help when long term care is needed. In practice, ‘official’ help through the NHS, social care and other agencies can fall well short of what is ideal, so creating an opportunity for insurers to step in and give unbiased advice at no cost. Such help can be invaluable and, because it is funded by every customer rather than just those who use it, the cost per policy can be very low. We hope if this isn’t yet included, that it will be on this and similar policies in future.
So where does that leave us? We’ve thought long and hard about this and changed our minds a bit too it must be said. Where we have ended up is recognising that practice is more important than theory. Yes, theoretically the cover could be better but, in practice if it were, the plan would probably not achieve its objectives any better and fewer people might buy it and it would certainly be more expensive. So in conclusion (it’s OK, we’ll get off the fence now…) we like the plan, but we also challenge the industry (and VitalityLife – one of the most innovative of protection insurers) to continue working on how to get even better solutions.
A final comment – our review has focused on the LTCI element of the plan, but it really is quite a comprehensive beast and demands some time to be invested to fully understand all the options and how to get the best out of the plan. Not a criticism – just a fact. The LTCI element of the policy provisions do not even start until page 120 for example.
Plus points: Permanent life cover with accelerated LTCI benefits; Tiered benefits (20% or 100%); Recognises confused state and stroke (two of the major causes of needing LTC); Life cover can be protected too; Vitality supports good lifestyle decisions, which should lead to fewer claims (no one really wants to claim under such policies, even if that’s how you get best value from them); Simple in concept and practice; Underwriting should be relatively straightforward; Life cover can be written in trust.
Not so plus points: Complex – the policy provisions run to 124 pages; Life cover falls away on Level 2 claims(unless protected) and is reduced on Level 1 claims; In a worst case scenario, there won’t be money available on death to pay IHT bills or benefit beneficiaries (although paying for care out of other resources would also leave less on death); Conditions such as Alzheimer’s can lead to the longest period of needing care, yet get the lower payout level; Pre-funded LTCI failed in the 90s – will it fail again now?
Website: http://www.pruprotect.co.uk.
Rating (max 10): Innovation: 9. Overall: 7.5. Silver
Tags: VitalityLife; WL; LTCI.