Rates for new life policies may rise

Life assurance premiums could become more expensive for new policyholders for the first time in years, following moves by reinsurance companies to increase rates.

However, most existing policyholders will be paying premiums that are guaranteed for the length of the policy term and won't be affected by any increases.

A spokeswoman for Hibernian Life & Pensions, one of the more competitive players in the market, said reinsurance rates had been hardening over the previous 12 months, putting pressure on premiums across the market.

"We have not increased our rates yet, but we are currently reviewing them, so our advice for people who are considering taking out life policies is to do so as soon as they can."

Eagle Star, another aggressive insurer in the market, increased its life premiums late last year.

Irish Life, Bank of Ireland Life and Ark Life each said they were not expecting to increase rates.

Mr Brian Woods, actuary and finance director at Ark Life, said the reinsurance market had been "very, very competitive" of late, but that the days when the companies were "falling over each other for business" were now over.

"We saw a tendency in recent times for reinsurance companies to become stricter. Some smaller players probably went too far and are now having second thoughts."

The underlying rates on life assurance offered to insurance companies by the two main reinsurers, Swiss Re and Munich Re, are stable, Mr Woods said.

However, critical illness premiums remain under pressure, he added. The product is still a relatively new concept and despite strict policy terms, including tight definitions of the medical conditions that can give rise to a payout, insurers have been stung by the level of claims.

"There's a general awareness now that some critical illness policies were mispriced," Mr Woods said.

Although improved mortality rates have led to substantial decreases in the cost of life assurance over the past decade, medical advances can actually result in higher critical illness premiums, Mr Woods said, due to higher detection rates.

A spokesman for Canada Life said average premiums on critical illness policies had crept up over the past two years, however he said smokers were bearing the brunt of the price increases.