Premium hikes also expected for PMI
Almost a third of advisers expect premium rates for protection products to rise by between 10% and 25% next year, research reveals.
A poll of 454 intermediaries carried out by the Personal Finance Society (PFS) – a professional body for financial advisers – suggests the effect of numerous legislative changes due to come into force in six months’ time could have a significant impact on sales.
On December 21 the European Gender Directive will force insurers to charge men and women the same amount, which is expected to push up life cover costs for women by as much as 15%. This will be followed by the introduction of the Retail Distribution Review and industry tax changes in January 2013.
PFS’s research found that one in four members polled believe premium rates for long-term protection policies will increase by 5-10% next year, while a further 30% believe the rate hike will be between 10% and 25%.
Some 4% of respondents even thought premiums would rise by more than 25%, while 14% of those asked expected a small increase of 0-5%, and 12% expected no overall rise.
Protection consultant Kevin Carr said that against a background of generally falling premium rates in recent years, the effects of the expected price rises could have a “devastating effect” on sales volumes in early 2013.
He said: “The risk is that the industry’s future prospects could be considerably damaged by what will happen at the end of this year and into next year and beyond.”
The research also shows that advisers are expecting significant premium hikes next year for private medical insurance (PMI).
The results were similar to those for protection premiums, with 39% of advisers expecting PMI rate increases of 5-10%, and a third predicting rises of between 10% and 25%.
Carr added: “PMI certainly has a track record of above inflation price rises, but we can see no reason for such a big increase in 2013 and the Competition Commission’s findings on private healthcare could even see a downward trend on rising prices.”
The full PFS survey will be published in this year’s Protection Review book, to be launched in July.