Prudential has unveiled details of its long-awaited "revolutionary" life insurance and critical illness (CI) plan.
The firm has been developing the product – entitled the Prudential Flexible Protection Plan – for the past two years and it will be rolled out from mid-July to selected protection intermediaries.
Paul Cowman, head of protection at Prudential UK, says the product is all about re-introducing advice into the protection marketplace and re-establishing trust and clarity for consumers and advisers.
After carrying out research among consumers and IFAs 18 months ago, Prudential considered the current CI model was unsustainable for the long-term future and, while the new plan has its route in CI, Cowman believes it will revolutionise the market.
In particular, the product aims to address the high rate of declined CI claims which occur when consumers are confused about the illnesses policies will pay out for.
The plan therefore covers ‘serious illnesses’ as well as critical illnesses, with payouts linked to the severity of the illness and matched to the financial impact this has on the claimant’s lifestyle.
While most CI policies cover around 35 illnesses, the Prudential product covers 267 and therefore protects people at an earlier stage, with payouts ranging from 10% to 100%.
It offers protection against 140 listed serious illnesses and over 50 disabilities.
Cowman explains: “The product gives people more cover so they are paid when they lose one leg and, if they lose another leg, they will receive an additional payment.”
The severity table applies across every element of the plan and takes into account the treatment required, the symptoms, the emotional stress and trauma, and how long the policyholder is off work.
Cowman hopes the severity table, which Prudential developed with medical specialists, will take CI into the next 20 years of its existence.
He adds: “Customers need not be totally permanently disabled to qualify for a payment with the result that losing one eye is, for instance, enough to trigger a payout and if the condition worsens further payments could be made.”
The product also aims to take into account the fact the majority of complaints are about the disability element of protection plans.
Prudential has redesigned the disability model so if a policyholder receives a payout for a serious illness, it will trigger an additional payment if they hold disability cover. For example, renal failure will pay 100% for the serious illness and 100% for the disability, resulting in a payout of £200,000.
Moreover, if a policyholder has an illness which gets progressively worse, such as multiple sclerosis, the product will trigger additional payments each time the policyholder reaches the next severity level.
Cowman states: “In traditional policies, when the consumer makes a claim it will pay out £100,000 and then there will be nothing left. We reinstate the cover so if something else is wrong the policyholder is covered again. If someone has a stroke there is much more risk of them having a heart attack. A one-off payment doesn’t work, so we give significantly more cover.”
The product also contains optional child cover and allows parents to add an additional £100,000 on top of the standard £25,000 cover per child.
While pricing details are not available yet, Cowman states it is a premium product and it would be the wrong choice for IFAs who “play the price game”.
As a minimum, life or serious illness cover must be taken and on top of this consumers can add disability cover, optional child cover, income protection cover and unemployment cover.
Cowman adds: “We believe we have gone further than where the [Association of British Insurers] has gone. The ABI sets a benchmark but we go beyond this. Everyone else has stuck to the definitions, but we cover every definition the ABI does and significantly more.”
Kevin Carr, senior technical adviser at LifeSearch, believes the product is innovative and comprehensive and says the market needs a new product.
But he adds: “Only time will tell if the product is too complex. And we haven’t seen the new pricing. I expect it will be a little bit more than CI cover.”
Because of the product’s potential complexity, Carr suggests protection advisers who are already selling protection well will welcome the product, whereas those who have struggled and have cited complexity as a reason for their struggle may not welcome it.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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