Insurer fails to honour pending applications in price hike
Prudential has caused outrage among the broker community by increasing the price of its critical illness (CI) insurance and refusing to honour all applications currently awaiting processing.
The price increase, which could be as much as 40% according to some brokers, has caused Prudential to fall in line with other insurers which, have recently raised their premiums. However, it has been criticised for including all pending applica- tions in the change.
Paul Keeble, spokesman for Prudential, defended the decision and said: 'We made the changes, partly because of the new guidelines from the Association of British Insurers (ABI) which will change the definitions of critical illness, and partly because of the volatility of the reinsurance market. It was not pre-meditated. In addition, we are offering all those who have applications pending, 30 days free life and critical illness cover, with no obligation to buy.'
However, brokers have accused Prudential of moving the goalposts, and of delaying the processing of applications until the announcement was made. Ongoing cases will now be massively disadvantaged as the insurer has also changed the terms of the plans so that the rates are no longer guaranteed for the life of the policy, and instead will be reviewed every five years.
IFA firm LifeSearch has now begun legal proceedings and is trying to bring together all affected parties in a bid to seek '...redress for losses of both clients and intermediaries with business in the pipeline.'
Kevin Carr, senior technical adviser at LifeSearch, said: 'Had the Prudential simply closed to new business no such accusation could be made, but by treating all those who have already applied with contempt they hammer yet another nail in the coffin of the UK life insurance industry.
'Prudential claims to have taken advice from the Financial Services Authority (FSA) and that this action has been cleared. We find it hard to believe the FSA feels that allowing this could comply with their basic purpose, which is to maintain public confidence in the areas they regulate.'
Jason King, director of Life Policies Direct, was dismissive of Prudential's actions. 'This is nothing short of scandalous and is another example of the insurance industry paying little attention to the needs of the public and their own policyholders.'
