Home / - Reviewable Premium vs. Guaranteed Premiums
A wide range of life, critical illness and income replacement insurance plans can now be set up on the basis that the premiums are either guaranteed for the term of the plan, or periodically reviewable during the plan term.
Guaranteed premiums are almost always more expensive than reviewable plans initially as the guarantee has to be paid for at outset by the plan holder.
Premium terms are confirmed on the client specific illustrations.
If the premium is guaranteed this means that it will not change during the term of the cover. If the premium is reviewable this means that it is likely to change.
How and when insurers review premiums differs by provider. Make sure the documentation is read carefully before committing to any plan. Factors that may change and lead to a change in the amount the policyholder pays are:
• the future level of claims the insurer pays
• the amounts of money the insurer will pay to reinsurance companies with whom they share the costs of claims
• the number of plan owners who give up their plans early
• the insurer’s expenses
• inflation
• investment returns
• taxes and
• the amount of money the insurer needs to hold as financial reserves.
Pros and Cons
Reviewable premiums should allow you to buy more cover now for the same premium.
The downside is that the cover might become much more expensive in the later years, particularly if the claims paid out to other policyholders are higher than the life office anticipates. This risk of higher claim costs is significant as medical science pushes new diagnostic techniques forward with accelerates claims.
Guaranteed premiums provides the absolute certainty that if you can afford the premiums now then they won’t change for the entire term of the plan.
24 April 2007 12:54:30
New research has shown that the publication of league tables has an effect on death rates following heart operations.
The study, carried out at South Manchester University Hospital, found that whilst pre-operation predicted death rates had risen, the actual death rate after coronary artery bypass graft operations had fallen significantly between 1997 and 2005.
Opponents of the public disclosure of death rates, which began in 2001, had argued that surgeons could choose to turn away high risk patients, so as to improve their eventual showings on hospital league tables.
However, as lead researcher Ben Bridgewater confirmed, the increased scrutiny placed on heart surgeons appears to have had a positive effect.
"If publication of surgical mortality data had driven surgeons to turn down significant numbers of high risk patients, we would expect to see that reflected in the number of high risk cases coming to surgery," he said.
"This study suggests that the effect may not be as large as is feared."
The research team studied the death rates in four north-west hospitals, comparing the data before and after the 2001 start of the league table system.
While the predicted death rate rose from three per cent to 3.5 per cent, the actual post-operation death rate fell from 2.4 per cent to 1.8 per cent.
13 April 2007 16:24:44
Those who opt against taking out critical illness cover are at higher risk of suffering a stroke, according to new research.
The findings are as a result of a study by US scientists reported in the Journal of General Internal Medicine, which claims that people without health insurance are more likely to skip regular check ups.
This means that the early signs of an impending problem, such as diabetes, high blood pressure or high cholesterol levels, all potential triggers for cardiovascular disease, could be missed.
"Hypertension is the most powerful risk factor for stroke, and in our study we found that hypertension was significantly less likely to be well controlled in those lacking insurance," said lead author Angela Fowler-Brown, from the Beth Israel Deaconess Medical Center.
"We believe that our findings underscore the great importance of medical insurance in maintaining the health of the population."
White males were found to be most likely to lack insurance.
01 May 2007 12:33:54
Industry leaders have praised the recent decision by the Financial Services Authority (FSA) to standardise sales of life, income protection and critical illness insurance.
Nick Starling, director of general insurance and health for the Association of British Insurers (ABI) said that the changed regulations would help millions of customers, by improving their access to different types of insurance.
Mr Starling confirmed the importance of the FSA ruling: "People now live longer, have a longer working life and start families later.
"Rising house prices mean many have to spread their mortgage payments over a much longer term.
"For all these reasons, the need to have life cover at an older age is increasing."
The ABI's commitment to enhancing consumer options and understanding is evident in its recent proposal of changes to the standard definitions used in private medical insurance (PMI) documents.
Mr Starling commented, "The changes we are proposing to make to our statement of best practice for PMI will improve the clarity of common definitions and, importantly, improve, people's understanding of cancer cover in particular."
