Industry: Market shortcomings are brought to light in the Protection Review
The shortcomings of the protection and health insurance markets to communicate the importance of protection to consumers have been highlighted in the second annual Protection Review.
The report illustrates a hugely dangerous protection gap of £2 trillion between what the public has in place and their actual protection needs.
Despite the market's optimism for growth of more than 10% in 2004, a number of potential problem areas for the sector have been raised by the report. In particular, the report highlights problems in developing a new generation of critical illness (CI) insurance and individual private medical insurance (PMI) in the face of extensive extra spending by the NHS.
Going forward, it is widely believed that CI in particular is calling out for new developments to the product offering. However, to date, these suggestions only serve to address the industry's pricing problems rather than clarify the proposition to consumers, said Roger Edwards, products director at Bright Grey.
"Tweaks might help, but the problem is that the tweaks I have heard about all solve the industry's pricing problem. What they do not do is make the product easier for consumers to understand," he said.
The report also highlights continued frustration for IFAs in the time taken to underwrite and process protection insurance proposals. Discussing the paradox regarding technology, Peter Le Beau, co-editor of the report, said: "Some offices are committed to providing a 21st century approach to underwriting and administration, but IFAs are still disappointed at the service standards of many of them. It seems the more technological power they have, the harder it seems to be to use it effectively."
Le Beau also questioned the demise of the pre-funded long term care (LTC) market and its failure to make a major impact in the UK. Forthcoming regulation under the Financial Services Authority (FSA) will take effect in October this year and coupled with reinsurers' apparent lack of appetite for the product and the Government's failure to clearly communicate the cost of LTC to the public, the product's future remains questionable.
"It remains something of a mystery as to why this vital issue has not seen the application of more coherent Government thinking," Le Beau said.
