British Insurance British Loan Insurance
HEALTH INSURANCE - 1ST AUGUST 2007
The company:
Braintree-based British Insurance offers a number of direct and broker alternatives to high street lenders’ payment protection insurance policies. this plan is underwritten and administered by Lloyd’s underwriter Cassidy Davis.
The product:
Another new product from Simon Burgess’s British Insurance. This product is a payment protection insurance plan designed to cover loan repayments. Its key features are:
• A monthly benefit that is paid in the event of accident, illness or unemployment after 30 days off work. Alternatively, customers can choose accident and illness only or unemployment only cover.
• Optionally, the plan can include life cover of the lower of the outstanding loan or 50 times the monthly benefit.
• The plan is available to UK residents aged 18-63 and pays up to £1,000 a month or 75% of normal gross monthly income if less.
• Benefit is paid for up to 12 months and cover can last to age 65.
The plan excludes pre-existing conditions suffered in the previous 12 months until free of treatment for 24 months. Other exclusions are fairly standard for this type of plan. Death is not covered during the first 90 days, nor is unemployment cover for existing loans (unless the cover is replacing another policy).
Competitiveness and price:
According to British Insurance, its mystery shopping has found that consumers looking to protect a monthly repayment of £147.33 on a £7,500 five year loan could pay on average (if they chose payment protection insurance from 10 of the UK’s leading lenders) £1,680 more than they need to on payment protection insurance cover. With one lender a consumer could pay £59.85 a month to protect heir loan – adding more than 40~% to the cost of it (these are British Insurance’s figures and were based on a mystery shopping exercise on 19th June).
Premium rates for this plan are:
• £4.90% (£4.90 per £100 a month benefit) for life, accident, illness and unemployment cover.
• £3.90% for accident, illness and unemployment cover.
• £2.90% for unemployment cover.
• £1.90% for accident and illness cover.
Literature:
An eight page A4 brochure includes Key Facts, application form, direct debit mandate and the certificate of insurance (terms and conditions). The website includes additional information, including FAQs.
Commission:
Details available on request.
What they say:
Managing director Simon Burgess said: “The new British Loan Insurance offer life cover that provides 50 monthly benefit payments or clears the outstanding loan balance, tax free benefits form day one, options for accident/illness and unemployment only cover, and a monthly contract that can be cancelled at any time. No other provider can match the life benefits – it’s superior cover at a fraction of the cost.”
What we say:
Payment protection insurance is getting a bad press at present, but it is still a popular product and it meets a distinct consumer need. The real issues on payment protection insurance are around suitability and price and, where a client wants payment protection insurance cover, it just makes so much more sense to buy from a company such as British Insurance than to buy an overpriced own label product from a lender.
Many short-term loans offer single premium payment protection insurance, but that can be very poor value, especially if it is funded by increasing the loan.
This product can include life cover (although that is linked to the outstanding loan so reduces in value as the loan is repaid) and is simple to buy.
Many brokers are understandably nervous about the payment protection insurance market – and sales have fallen across the market in recent times – but the key is matching the right product to the customer’s needs and this remains an area undersold by many brokers.
Pros
• Undercuts high street lenders
• Can include life cover
• Underwritten by a leading Lloyd’s underwriter
Cons
• The life cover reduces if the loan reduces
• The underwriter can change cover/rates at just 30 days’ notice
• Income protection may provide a better solution.
