Can my insurer change terms mid-policy?
When you take out an insurance policy, whether for home or car insurance or protection cover such as critical illness or income protection, you expect the terms outlined to remain in place for the duration of the policy. So what if you get a notice from the insurer that the terms are going to change?
Like many policyholders, you probably think this would never happen - but, unfortunately, in the case of some income protection insurance policies, it does. In a recent case, some of our customers were told that not only were their premiums increasing mid-way through the policy but that the benefits were being scaled back as well. So, in this instance, what can you - and, more importantly, your insurance broker - do about it?
Income protection insurance
Income protection insurance is designed as a safety net in the event of you being unable to work due to illness or injury. It is sometimes also known as accident and sickness insurance, while some policies also offer cover should you be made redundant involuntarily.
We have recently helped a group of customers whose income protection insurance provider, April UK, planned to increase their premiums by 55%. In addition, the retrospective ‘back to day one’ cover was to be taken away and a four-week deferment period introduced. April UK was now asking for proof of earnings where previously no proof was required and outlined a new monthly benefit cap of 60% of earnings, where there had previously been no cap.
ActiveQuote head of partnerships Rod Jones said: “Unfortunately we’ve seen this happen a few times with short-term income protection (STIP) as the insurers see a surge in claims, especially around unemployment, then increase the customers’ premiums to cover their losses.
“I feel very angry that insurers are allowed to do this. STIP is only a 12-month policy, which is the same as car or home insurance. Can you imagine a car insurance provider turning round to a customer after six months to say they planned to increase a premium by 55%? It simply wouldn’t be allowed to happen, and STIP insurers should not be allowed to do this either.
“The good news for customers who take out these policies with a broker like ActiveQuote is that we work with different insurers, therefore we can look into sourcing an alternative solution.
“We contacted the customers in advance of them receiving the letter to let them know what was happening. We then offered to help them all find a more competitive policy with another insurer. Understandably, the customers were very disappointed and upset that they had their premiums changed in this way. A number simply cancelled their policies, while others were happy to allow ActiveQuote to look for another insurer to meet their needs.
“This case highlights the value of comparing income protection quotes through a broker when you first take out a policy. It’s rare that this happens but, should it happen to you, a good broker will be on hand to resolve things and make sure your policy continues to meet your needs at a price you can afford.”
According to latest figures from the Association of British Insurers (ABI) and Group Risk Development (GRiD), last year, protection insurance payouts reached record levels, with more than £5bn being paid to bereaved families and ill and injured workers. Almost 98% of claims were met, with payouts totalling £14.5m every single day in 2018.
More than 25,800 income protection payouts provided policyholders with, on average, £22,058, with illnesses such as musculoskeletal conditions making up a significant proportion of claims. More than 16,000 critical illness payouts provided customers with, on average, £70,900, while more than 35,000 bereaved families and beneficiaries were supported, with payouts totalling £2.9bn.