AIG Life UK exit sad news for HNWIs and customers with families, say advisers

So sad to see

Emma Astley, owner of Cover My Bubble, told Health & Protection this morning’s developments was “so sad to see” and had caused concerns for “many advisers out there”.

“AIG offers a great family critical illness policy where it has bump cover for pregnancy complications and child specific conditions covered, childbirth defects such as clef lip, cleft palate, and the hospitalisation benefit,” Astley continued.

“For us, more people want to see bump and children’s cover options and although there are good offerings within the market, AIG really stood out for this kind of family protection and leading the way for other insurers to move this way too.”

Better cover for families

Looking ahead, Astley said it would be interesting to see if Aviva moved forward and look at its propositions that include the above along with better added-value benefits and GP services.

“Currently there is a cost for the GP services and limited appointments along with no mental health support for children under the age of 16,” Astley added.

“For me, I want to see better cover options for families just like we are seeing with the new Zurich children’s and pregnancy complications cover which can be added on and taken off when not needed in the future.

“Zurich also has an option that the pregnant person’s partner can look at bump cover if they can’t have it due to medical conditions, higher height and weight ratio or medical history – meaning if they were to be diagnosed with a listed pregnancy complication, there is money for the family at that difficult time, just like Vitality does.”

It’s all about competition

For Joanna Streames, owner of Velvet Mortgage and Insure Services, today’s news is all about market competition.

“We all know that competition keeps companies on their toes and drives innovation, keeps prices fair and ultimately results in better outcomes for consumers,” Streames said.

“When you have two big players merging, it’s like reducing the number of players on the field, so there is less competition. And competition between companies fighting for market share is a good thing for advisers and consumers alike.”

Streames maintained the devil will be in the detail of today’s deal.

“I am happier that a reputable insurer like Aviva is taking over AIG, rather than it becoming an old back book insurer that operates only to manage existing policies.

“They are two very different companies so the struggle will also be merging the two cultures and creating one identity.

“There are lots of aspects of AIG’s coverage that would be sorely missed and be a loss to consumers and advisers.

“It has very different underwriting stances and differences as well as with its core products and claims. AIG offers Smart Health which albeit a non-contractual benefit, is a strong and sound offering.”

But Streames also lamented the loss of another major protection provider following Canada Life’s exit from the individual protection market in November and Aegon UK’s sale of its protection book to Royal London earlier this year.

“The other concern is whether this is going to be a continuing trend, having seen the likes of Canada Life, Unum, Aegon leave the personal protection market,” Streames concluded.

HNWI worries

While Katy Davies, specialist protection adviser at Henry Dannell, raised hopes that AIG’s employees will find alternative employment, she also noted the insurer’s focus on high net worth individuals.

“With our protection business being based in central London with a high percentage of high net worth and ultra high net worth clients with varying income structures, I worry other providers are not as comfortable with this clientele and where business for them will be placed,” Davies said.

“I also have some non-UK resident clients, in Dubai specifically; looking to insure their UK mortgage, AIG was the only insurer in the market to consider and underwrite this.”

According to Davies, the domination of the protection market by two insurers has led to intensifying competition and propositions that appeal to the masses.

“The issue with this is that their underwriting philosophy can be rigid as they seek a ‘clean’ book of business,” Davies said.

“Cheap premiums indicate high volumes of business, slow processing times and underwriting that doesn’t lend itself to unique, high net worth, quirky cases.

“I am interested to see which – if any – provider will establish themselves as being able to absorb and service these clients to a high standard of customer service, with more bespoke underwriting attitudes and expertise in complex income and financial positions.”

Maintaining AIG’s USPs

Andrew Wilkinson, director at Moneysworth, also harboured concerns about how the deal would affect the adviser market.

“Aviva has not given any guarantees so at this stage no one apart from Aviva knows the extent to which it intends to maintain or not AIG’s unique selling propositions (USPs) post deal.

“But if those USPs are dropped then it is likely to mean less choice for advisers and their clients which would be a real concern.”

Wilkinson added the deal also suggests the protection market is not an easy one in which to make enough profit and it continues the process of consolidation across the market which means less choice for consumers.

“Of course Aviva already has its own set of USPs and it is a strong company, but each time insurers consolidate, the market tends to lose something valuable.

“I think most protection advisers will have similar concerns at the current time.”