As the population of the UK ages, more insurance companies are targeting the older consumer. But are they offering a fair deal? Michael Faulkner reports
The UK’s older population is more active and wealthier than ever. And with their increasing spending power, they are becoming an important consumer market – one which a growing number of insurers are looking to target.
According to the Department for Work and Pensions, there are an estimated 9.7 million people over the age of 65 living in the UK – approximately 16% of the population. By 2010 this figure is expected to rise to nearly 12 million or 18.8% of the population.
Saga, Fortis and Direct Line are the main players insuring this age group.
But, despite the availability of insurance targeting the over 65s, concerns about access and the price of cover remain.
In many instances there is an age cut off, beyond which cover is not available, or the price may suddenly soar, pricing some people out of the market.
Last year, Biba told the International Travel Insurance Conference that the industry needed to respond to these challenges and to address the specific needs of the older traveller.
Peter Staddon, head of technical services at Biba, said the industry should sell travel insurance to the older traveller in the form of what they actually need, and not what the insurance industry wished to sell.
Earlier this year, the ABI set up a working party to look at how the problem of access to cover could be addressed.
The ABI research found that cover was available – four out of five older travellers had no problem arranging travel insurance. The problem for elderly people was shopping around to find cover.
The aim of the working party, which comprised representatives from the insurance industry and charities Help the Aged and Age Concern, was to develop a system to help direct older customers to other providers, whether insurers or brokers.
Government concern
Six months after the working group was formed what has it found?
Chairman Keith Morris said: “There was concern that some insurers weren’t prepared to cover in motor and travel. Home insurance was not an issue.
“We get the feeling from government that it is concerned about how insurers are treating older customers. But we are not about pushing insurers to change pricing models – each insurer has to set pricing.”
Morris, who also chairs Sabre Insurance, said that in addition to finding cover older people sometimes had difficulties with premiums.
“Older people don’t tend to understand the liability element of the pricing, for instance,” he said.
Morris said the working group would be developing some form of contact centre, possibly operated by a charity such as Help the Aged, to direct elderly people to insurers and brokers providing cover.
The detail has yet to be hammered out but Morris suggested that some form of telephone service was possible as many older people may not have access to the internet.
The FSA may also work to help improve older people’s understanding of how cover is priced.
Morris said: “The FSA is also looking to see if it can help and may issue a booklet explaining motor pricing.”
The regulator already produces ‘plain English’ booklets explaining insurance products.
Travel insurance appears to be more problematic. Morris said travel insurers tended to have an age limit given the risk of health problems that come with age.
“There is no easy solution,” said Morris, pointing out that single-trip travel insurance was available, although premiums could be high. “Some sales channels do get a step in pricing, with prices going up dramatically after a certain age.”
He added: “Pricing awareness is an issue although most elderly people do understand there is a medical element.”
Janet Connor, managing director of over-50s broker RIAS, suggested that using higher excesses and offering a menu approach to cover could help reduce premiums.
These techniques have been used by private medical insurers to create more affordable policies.
Research: the grey market
New figures highlight stark differences between the cost and availability of cover for motor and travel insurance, as well as the number of insurers who were willing to quote for elderly people.
Independent research conducted on behalf of Biba looked at the availability of motor and travel insurance offered by direct writers and brokers.
It looked at the travel insurance provided online by the top 25 providers, including insurers, brokers, affinity groups and banks.
The study found that 40% of the online providers – ten out of 25 – would not offer any form of cover for travellers over the age of 65. Only four companies Saga, Churchill, Direct Line and Marks & Spencer offer cover for over 85s.
A similar exercise was conducted with online motor quotes. 19 companies were prepared to quote for over 65s. However, this reduced dramatically to eight for drivers over the age of 80 and down to four over the age of 85.
The four were AA, Swinton, Saga and the Post Office. Motor premiums jumped considerably as age increased.
In relation to travel insurance sold via intermediaries, the study found many of the same access issues.
While many intermediaries dealt with several insurers, there were far fewer options on the table once the insured reached 70 years of age.
Intermediaries were buoyant with regard to the availability of motor insurance and many reported a good scheme available, the study found.
As the driver’s age increased the choice of insurance companies reduced. As the choice reduced the premiums increased, on average by approximately 20% after reaching the age of 70.
Annual increases resulted but another significant increase resulted at the age of 80.
The premiums increased by between 35% and 45% from the age of 79.
