After discussion with the Treasury, the Equalities Office and the Association of British Insurers (ABI), BIBA has recently agreed that, from April 6th 2012, their members and those of the ABI are now obliged to refer any travel or motor insurance customer that they are unable to insure due to their age, to a provider that can insure them or to a dedicated signposting service.
While clearly an advantage to older customers who have complained for many months at the poor availability of motor and travel insurance, this agreement also helps the insurance market as a whole. Insurers will be able to retain the ability to price on risk by age while insurance brokers and intermediaries can promote their value to their peers and their customers by acting as a referral point.
BIBA already operates their Find a Broker scheme and this will now be a formal signposting service although it is likely that providers of insurance to the older age groups will no doubt be looking to market their services directly to the big players.
From a risk perspective, insurers will no doubt be watching with interest, and possibly trepidation, to see whether their retail schemes see a sudden spike in sales to the elderly, referred by more risk-averse providers. At that point, there may be a need for some speedy risk management and possible re-alignment of target market.
However, many insurance providers are reliant upon a consistent mix of risk to support their pricing models, and cross-subsidisation by age means that any change in the age risk needs to be monitored. The aggregator market has shown that greater segmentation by age, in particular in younger age groups, reduces premiums and that the supply of product to older customers may reduce wherever insurers have the choice to participate. Ironically, enforced signposting and commissionable referral may reduce off-the-shelf availability and further drive older customers to more specialist providers and possibly higher premiums.
As part of the Collinson Insurance Group, we have a number of travel insurance brands, including InsureforAll, Club Direct and Columbus Direct, that cover customers of any age looking for single trip insurance. Our belief is that, wherever possible, customers should be given the choice to take out the cover they need but at the right price for the risk.
Greg Lawson, Head of Retail at Columbus Direct
