Zurich Launches ‘Flatter Pricing’ Option

Zurich has released a new premium pricing option intended to offer choice to consumers and advisers at policy commencement.

Called ‘Flatter Pricing’, this option is being offered as an alternative to the insurer’s existing ‘standard’ pricing structure.

Taking effect from 7 February, the Flatter Pricing option gives a choice  to smooth the premium curve for variable-age stepped premiums in Zurich’s flagship Wealth Protection range, together with the IP product attaching to its Zurich Active offer.

…the Flatter Pricing model offers slightly higher premiums in the early years…

Intended, according to the insurer, to have the effect of delivering more premium stability, longer-term value and greater choice, the Flatter Pricing option offers slightly higher premiums in the early years, with smaller annual increases.

When comparing Zurich’s ‘Flatter pricing’ option to its ‘Standard pricing’ option, customers would be paying cumulatively less after about five years.

In a video message to advisers, Zurich’s Head of Propositions, Ioana Logan, explains the insurer’s standard offer includes lower initial Year-1 premium pricing which, in part, reflects lower claims experience in the early years after policies are taken out, and which also presents a more affordable entry point.

She concedes that when the lower premiums taper off over time, this can lead to significant premium increases. With the introduction of the new option, the choice for advisers and their clients now revolves around lower initial premium pricing which increases more rapidly over time (standard pricing), and higher initial pricing, but smaller year-on-year premium increases (Flatter Pricing).

Logan emphasises:

• Once a policy is in force, the policy owner is not able to switch their pricing choice
• Any future increases to Flatter Pricing will also be applied to standard pricing to ensure the Flatter Pricing option will be more stable and cumulatively lower than Standard after about 5 years

The introduction of this new option brings into light the ongoing debate regarding upfront premium discounting. The challenge for insurers is addressing calls from many in the sector to eliminate upfront discounting because of the significant premium increases which occur over time and the impact these increases have on policy holders, while still catering to the apparent popularity among advisers of lower initial pricing as evidenced by the significant volumes of new business written on these terms.

Zurich’s Head of Adviser Channel, Life & Investments, Kieran Forde, acknowledges the challenge for the insurer in balancing these two conflicting positions and says the introduction of its Flatter Pricing option is consistent with Zurich’s long-held philosophy of offering choice to the consumer and advisers.

He says this philosophy was also front of mind when Zurich launched the new Continuous Care option within its TPD offer in October last year (see: Zurich Launches New TPD Option).

Advisers can click here for more details on the Zurich Flatter Pricing offer or watch Ioana Logan (below) outline the proposition in more detail.