Prudential's new product, PruProtect, has caused a bit of a stir in the market. Adviser Dale Tranter outlines what he thinks about the offering and how it matches up to its predecessor.
Prudential's Flexible Protection Plan launched last year but has since won more plaudits for innovation than for topping sales league tables. There is now, however, a new improved version available from the provider. PruProtect, like its sibling PruHealth, is a joint venture between Prudential and South African insurer Discovery, with systems being established in the latter's home base to support the product. PruHealth has been successful in its short two-year lifespan and PruProtect's challenge is to replicate the private medical insurance product's success in the individual protection market.
Conceptually, the new plan is similar to the serious illness and severity-based old version. One major enhancement, however, is the introduction of the Vitality concept - the unique selling point of PruHealth's offering that enables clients to reduce future premiums depending on their lifestyle. By walking, going to the gym and even downloading healthy lifestyle information, policyholders will clock up Vitality points to eventually propel them towards the next level of discount - or at least maintain their current rate. This challenges the industry's affection for guaranteed rates, but policyholders who like the concept will accept the challenge of trying to reduce their premiums - something that is not usually possible on a long-term insurance contract - and implicitly accept the downside of a premium increase if they fail. If the client has selected reviewable premiums or indexed cover then any rises due to these may outweigh, or exacerbate, any Vitality-related changes.
The other principal enhancement is probably the key one - price. Pru has so far been out of sight on the portals, effectively leaving it out of mind. It is now, however, set to be in the top five across the board for accelerated life and serious illness cover, which should make it harder to ignore from now on.
Product innovation
This plan remains innovative in a number of ways - severity-based serious illness, enhanced benefit for severe disablement under income protection, a more comprehensive treatment of terminal or permanent disability, waiver available to age 70 and a two-year payment period and cover on termination of employment under redundancy cover. It even has waiver of premium on death, which is only applicable - unsurprisingly - on joint life policies. With a few other additions to serious illness, there are now around 150 conditions that can be claimed upon, centred around 14 different claimable areas of the body.
So with pricing fixed, are there any other barriers to success? The first has to be complexity. In the mortgage market, many clients are on a budget, as are advisers with regard to the amount of time they can reasonably spend discussing insurance products. Clients are primarily interested in getting their mortgage sorted out and view insurance as the necessary evil that comes with the good bit - the mortgage. Advisers may feel the addition of the Vitality element may be too time consuming to bother with.
Some clients will see the Vitality element as a big plus. Others may see it as gimmicky and a lot of bother for a saving of not more than 50p a month for the following year's premium.
While a support structure has been set up in South Africa to cope with the influx of new business, it is as yet unproven for UK protection business.
Finally, its success will depend on the ongoing health of the critical illness market, which is still a long way from being broke. Many commentators seem to think that these plans are the way forward, but not all of the reassurance community feels the same way. Many similar plans will be launched in the next year or so, their success will be like pulling a brick with an elastic band. A lot of effort has been and will be exerted on severity-based plans for precious little return but one day they may surprise the industry by taking off. PruProtect has done a lot of the spadework for subsequent launches, for which the wider provider community will owe it a considerable debt. n
Dale Tranter is research product developer at Sesame
