The potential for further consolidation in the life insurance space is the “blackest cloud” for 2024, according to CIExpert director, Alan Lakey.
Lakey explained that UK life margins are tight which has led many insurers to abandon the market.
“This also invites harsher underwriting and claims management and, while it may seem counter intuitive, there is a clear argument for premiums to rise to better support the market and ultimately consumer choice,” he added.
He warned that, if the number of insurers reduces much further it will diminish choice, ultimately leading to products becoming homogenised and consumers becoming less likely to require an adviser's assistance.
Back in September, Aviva revealed it would buy the UK protection business of AIG for a consideration of £460mn.
Several providers have sold their protection business in recent years.
For example in May Canada Life sold its UK individual protection business to Countrywide Assurance.
Then in April, Royal London, the UK’s largest life, pensions and investment mutual, announced it would buy the individual protection book of Aegon UK.
Perpetual changes
Lakey also predicted that the critical illness market will “continue spinning through its perpetual changes” at the start of the new year.
This is because insurers will “rush” to meet the end of January deadline for incorporating or enhancing the revised Association of Business Intermediaries minimum condition wordings.
Insurers will use this as an opportunity to “clamber up the quality ladder” or “reassess” to gain or retain market share, Lakey stated.
Additionally, he said that some providers may elect to keep their premiums lower by fully adopting the revised ABI cancer wording which excludes stage 1 thyroid cancer, which reinsurers have been pressing for since 2018.
Recent years have seen the market edging towards outcome-based claims wordings and moving away from the lists of conditions.
Lakey said this is something that CIExpert has “been promoting” for many years.
While acknowledging that this has proven to be a slow-process, Lakey stated that “common-sense” dictates that this is the way forward.
As a result, he expects other insurers to follow this path.
Rate rises
Lakey also stated that rate rises are “seemingly over” and, as a result, prospects for 2024 are “rosier than we may have imagined”.
He also pointed out that house prices appear to have ended their recent falls and first-time buyers are coming back to the market.
Additionally, he said that consumer duty requirements mean that mortgage advisers can no longer "shirk their responsibilities" and must now "engage" in a protection conversation or signpost to a specialist protection adviser.
“Inevitably this will lead to an increase in protection sales,” he added.
Lakey also predicted that added services benefits will “continue to evolve”.
As a result, it is “almost certain” that, as they improve, they will become contractual and offered as a paid for option.
He added that, ultimately, plans will “probably” become modular with advisers and clients designing them around needs and budgets.
