Norwich Union's (NU) announcement that it is now reducing guaranteed premiums on critical illness pl...
Norwich Union's (NU) announcement that it is now reducing guaranteed premiums on critical illness plans, after it bumped up prices by 40% less than three months ago, brings more uncertainty to the market.
Although the reductions mean rates are still over 20% higher than they were before the original hike, the backwards move by NU does not give advisers or clients confidence in insurers' pricing techniques for guaranteed contracts. Did NU over-react, or simply think it could get away with charging more under the guise of a turbulent market?
NU was the first UK insurer to take the plunge and increase rates. Although there have been bigger increases announced since ' by Standard Life, for example ' some insurers have raised rates by just half this amount, pushing NU's rates to the lower rungs of the premium comparative tables. Is this latest move to lower prices a knee-jerk reaction from the marketing department? It must be questioned whether NU would have made the same decision had more insurers hiked their rates to the same level as its initial rise.
NU's Keith Simm has admitted the cuts could be temporary, depending on subsequent moves by the rest of the market. This all adds up to more confusion for advisers. Although no one was jumping for joy at the market's decision to up guaranteed rates, at least there was some certainty on which to base advice. Up until now it seemed unlikely guarantees would fall, making it easier to explain the pros of reviewable rates. Following NU's move, advisers could be better equipped with a crystal ball than a calculator.
Kirstie Redford, editor
