Insurance World

In recent years sales of critical illness insurance have flagged. The primary cause is the huge 70% increase in premiums experienced during recent years. For many, critical illness insurance has simply priced itself out of the market.

It’s not that critical illness insurance is a bad idea. After all it pays out a lump sum if the policyholder is diagnosed with one of the many critical illnesses listed on the policy and the policyholder survives at least 28 days from diagnosis. (Note: some policies have a 14 day survival period.) Most policies have a huge list of insured illnesses although about 60% of claims are for cancer – not surprising, as 1 in every 3 people will develop cancer sometime in their lifetime. In fact when you look at the concept of Critical illness insurance you can easily make a case that everyone living on earned income should have a policy. It’s designed to give you a pot of capital to live on if serious illness prevents you from working normally.

Premiums have increased dramatically because medical advances have meant that many illnesses that proved fatal in the past are becoming quicker to detect and easier to treat. Hence insurance companies have found themselves paying out earlier on claims and on illnesses which are not necessarily debilitating - which was the original purpose of critical illness insurance.

To give you a better idea of the sort of illnesses we’re talking about, here’s a typical list:

Alzheimer’s Disease

Aorta Graft surgery

Bacterial Meningitis

Blindness

Brain Tumour

Cancer

CJD

Coma

Coronary Artery by-pass surgery

Coronary Artery Angioplasty

Deafness

Heart attack

Heart Valve replacement/repair

HIV/AIDS resulting from blood transfusion

Inability to perform your duties of occupation

Kidney failure

Leukaemia

Loss of limbs

Loss of speech

Major organ transplant

Motor Neuron diseases

Multiple Sclerosis

Occupational HIV/AIDS

Paralysis

Paraplegia

Parkinson’s disease

Stroke

Third Degree burns

Any illness that results in Total and Permanent disability

Insurance companies have at last realised that they’re not going to get anywhere marketing policies that people can’t or won’t afford, and where the companies can’t afford to lower prices. So it now looks as if insurers such as Scottish Widows are considering a break through – splitting the cover so that the prospective policyholder can specify which illnesses he or she wants to insure against. It’s a form of “menu pricing” – cover for each illness would have a price and you simply select which illnesses you want to insure against.

Whether such insurance proves popular will very much depend on the cost. For example, if cancer accounts for around 60% of current claims, you’d expect the premium for covering cancer alone to be about 40% cheaper than a full strength critical illness policy. We’ll have to wait and see.

If you’re interested to find out how much a standard critical illness policy would cost you, you’ll find it cheapest on the Internet. The best sites to look out for are the independent discounting brokers who deal with all the big insurance providers. These brokers can search the whole market for you, come up with the cheapest insurer, and discount their price. Try to use a broker who’ll also give you personal advice on the phone as some policies do vary in the scope of their cover.

Swinton Group, the UK’s biggest High Street insurance chain, today purchased the high street insurance intermediary business Budget Retail from the Budget Group.

The deal continues the growth strategy of Swinton, giving the company an annual income of more than Ј500m and consolidating its position as a leading UK insurance intermediary.

Swinton’s existing 350 high street branches (including those of its brand Colonnade, acquired in 2002) are now joined by 92 Budget branches offering home insurance, car insurance, travel insurance, pet insurance and most other forms of personal and life cover.

The Budget Retail brand will be maintained for 12 months, after which the branches will trade under one of the Swinton brands.

Patrick Smith, Chief Executive of Swinton, says: “This deal means that we have over three times the national coverage of our nearest competitor. We are within easy reach of almost everyone in the UK. This gives us a huge advantage over our major competitors who only offer telephone or internet contact.”

“Research shows that when customers need assistance with their insurance impersonal interactive voice response is strongly disliked by most people. Our professional teams, working right across the UK, give us a great opportunity to capitalise on our personal service operated through local branches either face to face or on the telephone. Our successful growth has shown the clear benefits of providing this personal service.”

All Budget branch staff will remain employed by Swinton. The total number of Swinton employees is now 3,000, made up of staff working in the branches, call centres and head office functions.

As part of the deal Swinton will also take over Budget’s taxi and motor-home units based in Warrington and Coventry respectively.

Around 230,000 policies will be added to the Swinton database and the combined operation will hold more than 2m insurance policies.

Patrick Smith added: “We have strategic plans to continue this growth and enhance our current business capabilities by increasing our customer base through further improvements in direct marketing, increasing our diversification of product and enhancing the relationship between our branches and our online business.

“We intend to keep all the new branches open as we believe that Budget’s coverage is complementary to our existing network and the increased capacity will allow Swinton Group to handle our planned growth and further service our customers’ requirements.

“Our model has great capacity for expansion and we intend to take on the giants of our industry and show that, by caring more for our customers, we can become the leading provider in the personal insurance market.”

Last year Swinton had a gross premium income of Ј440m and expects premium income to grow to more than Ј600m next year following today’s purchase. The company has made over 250 broker acquisitions during the past five years.

Cobbetts LLP acted as legal advisors and Swinton received advice from Ernst & Young.

For more information and for interviews with Swinton Chief Executive Patrick Smith, contact Andrew Spinoza or Jaime Markey   at SKV PR 0161 236 9909,