Industry: Speculation rising Virgin Money is rekindling scaled-down CI plans
Speculation is mounting that Scottish Widows and Virgin Money are in negotiations to launch a radically scaled-down critical illness (CI) product in a bid to rejuvenate the ailing market.
Although both insurers remain tight-lipped on the proposition, neither has issued an outright denial of the rumours. "We won't be commenting on this. It is nothing more than speculation," said Nick Kirwan, protection market director at Scottish Widows.
Scott Mowbray, head of public relations at Virgin Money, issued a similar rebuttal: "We have no comment to make as this is all just speculation. If we had something to announce we would announce it." Virgin Money's website seems to indicate that changes are afoot, however, stating: "Right now we're giving our life cover a major revamp. We'll be unveiling our new and improved life protection product in the new year."
The details of the proposal are sketchy, but this is not the first time Virgin Money has approached a protection provider in a bid to launch a restricted CI product.
In late 2004 Virgin Money held discussions with Edinburgh-based insurer Bright Grey on the feasibility of bringing a new CI product to market covering only the big three critical conditions: cancer, heart attack and stroke.
The proposal would have controlled costs by limiting the conditions covered, and included an impact-based claims process under which only 25% of the claim would be paid on diagnosis. The remaining 75% of the payout was to be retained until the severity of the illness was assessed and found to meet relevant criteria. The impact of the illness would be considered by a doctor of the insurer's choice, with a successful claim dependent on the doctor's evaluation of the claimant's condition.
"Virgin Money was very keen on the three definition product model, but Bright Grey rejected the proposal because it felt the offering was not comprehensive enough and could have led to mis-selling claims. That would not have been a problem for Virgin Money of course, since it sells direct," commented a source close to Bright Grey.
Although the intricacies of the product under discussion between Virgin Money and Scottish Widows remain unclear, a product based on the model previously proposed simply will not work, according to advisers.
"This design cannot be cost-based because the three conditions covered already account for 75% of claims," said Alan Lakey, partner at Highclere Financial Services. "This type of product would only take off if the more comprehensive versions are dropped by providers and re-insurers. I certainly would never recommend such a product unless it was the only version available."
"Something needs to be done about CI but this design is not it," Lakey added.
