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7 May 2020

Coronavirus: what it means for life insurance, health insurance and income protection

WPA Healthcare has paid private medical insurance customers a refund ahead of new guidance from the FCA

WPA Healthcare has become the first private medical insurer to refund policyholders impacted by the disruption to their cover caused by the coronavirus pandemic.

This comes as the FCA announces new guidelines for providers about when they must offer general and protection insurance customers payment help, policy adjustments and refunds during the crisis.

Here, Which? explains what's happening to protection insurances that you might need to turn to or carry on paying during the coronavirus crisis. You can navigate this story using the links below.

You can keep up to date on the latest coronavirus news and advice with Which?

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How coronavirus is impacting health insurance

WPA Healthcare has refunded policyholders that have seen their private medical care delayed and disrupted as resources have been switched over to support the NHS-led response to the pandemic.

It paid 40% of April's monthly premium back to individuals who had bought policies for themselves and small businesses where employers who had provided cover as a benefit to staff.

All those with private health cover, cash plans and dental policies in force on 22 April were due for a rebate. Most had it automatically paid back into their bank accounts on or around 29 April.

WPA Healthcare said it was returning the money because it knew some treatment had been postponed.

The firm told Which? it may make further refunds depending on how the situation develops, but warned that it will need to consider the cost of a likely surge in pent-up demand for private healthcare once the coronavirus crisis is over.

New rules on refunds and premium cuts

The mixed response by private medical insurers on refunds and premium cuts looks set to change.

The Financial Conduct Authority (FCA) brought in new coronavirus-related guidelines on 18 May on how insurers should help policyholders.

Before then, differing stances by insurers had caused confusion and dismay among policyholders.

Bupa, AXA-PPP and WPA have said customers might see price adjustments, some in a year or more, but others were tight-lipped.

Some were offering reduced premiums for reduced cover or payment holidays while maintaining cover, but they haven't wished to publicise this and they have only offered assistance where a customer gets in touch.

The FCA's new guidelines should make it much clearer about what help or refund your insurer must offer.

Providers are expected to contact policyholders who have failed to pay in order to work out how essential cover can be maintained.

How health insurers responded to COVID-19

Before the FCA's proposals were brought in, we detailed the position declared by the different insurers in the table below.

According to broker ActiveQuote that works with large price comparison websites, these insurers have been taking into account what level of cover a policyholder has, how long they have been with the insurer, whether they hold a private or family or company policy and what medical treatment is needed.

Under the FCA guidelines, the decision to adjust cost may hinge more on what's fair for the customer given their financial position rather than their record with the company.

ProviderWhat existing customers should doCash benefit for overnight stays at NHS hospitalsNew services
AvivaPolicyholders should discuss options with insurer.£100 per night subject to policy terms.
AXA PPPWill adjust for treatment delays, but won't know figures until the end of 2021 at the earliest.Increased by £100 per night to £150 per night from 1 April.Virtual clinic with consultants via phone, video or online. Extra wellbeing support.
BupaSome care will be delayed but urgent care for diseases such as cancer continues. Other treatment may not be delivered so there will be a refund. This has yet to be determined but will vary according to the customer group. Policyholders facing financial difficulties should email Bupa.£50 per night for up to 35 nights.Referrals for treatment extended up to three months during coronavirus crisis. Policyholders on a reduced hospital list now given access to an extended list. Digital GP service using an app now covers COVID-19 related mental health conditions. Physiotherapy via an app.
CS HealthcarePolicyholders should discuss options with insurer.No confirmed figure.NHS doctors can refer policyholders for private diagnosis.
ExeterPolicyholders should discuss options with insurer.Cash benefit doubled to £500. It's capped at 20 nights - £10,000.
Freedom HealthPolicyholders should discuss options with insurer.No confirmed figure.All customers can now access GPs 24/7, plus an online video consultation with a GP between 8am and 7pm every day.
General & MedicalPolicyholders should discuss options with insurer.Offered but not for policyholders hospitalised with COVID-19.All customers now can access the GP line 24/7. All corporate, business and sports clients can get employee assistance.

Information correct as of 7 May 2020.

Cash benefits boosted for overnight stays in NHS hospitals

Most of the private health insurers have raised the amount of money given back to policyholders if they have to stay in an NHS hospital.

Some have increased this so-called NHS cash benefit by £100 or more per night.

You can find more details on each insurer in the table above.

Waiting times increased

Policyholders will have to wait longer for care and elective surgery may be cancelled or postponed.

Major provider Bupa has said that urgent cases including cancer treatment will still go ahead.

New and extended services laid on

Although private health insurers can't provide access to care in some areas as quickly as before - one of the main reasons why people buy health insurance - many insurers have beefed up other services.

Some have stepped up the provision of services such as mental health support and widened the range of where patients can be referred to.

In response to social distancing, most have increased access to medical expertise by phone, video, online and apps.

What will happen to health insurance prices?

In March, the Association of British Insurers (ABI) told Which? that it did not expect COVID-19 would push up prices. ActiveQuote has confirmed this is the case. Aviva said its price rise in April was not due to COVID-19.

Treatment for people hospitalised for COVID-19 will be under the NHS even if it's received within a private setting.

What should privately insured COVID-19 patients do?

They should turn to NHS 111 and if necessary continue on with the NHS.

All COVID-19 patient management is being led centrally by Public Health England with the NHS leading the response.

Private hospitals don't include emergency facilities. Policyholders can, however, use their private insurance for advice and support.

What's happening to income protection?

There are various types of income cover, which protect either a proportion of your salary or specific monthly outgoings (such as mortgage or rent payments) in the event that you can't work.

Long term income protection - which potentially pays out until your retirement age - generally only kicks in if you're put out of work because of an accident or illness. Short term income protection products - sometimes referred to as Accident, Sickness and Unemployment (ASU) cover - pay out for a maximum of one or two years, but can come with options for protecting against unemployment or redundancy.

ActiveQuote, the insurance broker used for income protection by five other major price comparison websites (Confused.com, Go Compare.com, money.co.uk, MoneySuperMarket.com and uSwitch.com), said that its number of enquiries about income cover had risen by more than 1,000%, doubling each week and spiking on Tuesday 17 March as the numbers of people fearing job loss rocketed.

Comparison website Comparethemarket.com announced on Wednesday 18 March that it was temporarily suspending giving quotes on all forms of income protection.

But now that insurers have worked out what cover they can offer relating to COVID-19, Comparethemarket says it is once again able to offer comparisons for accident and sickness cover, but it still can't provide comparisons for unemployment insurance.

Unemployment cover remains unavailable

Unemployment cover ceased being available by 19 March, according to ActiveQuote.

The last broker selling unemployment cover, First Call Group, stopped taking new customers on 19 March. First Call Group told Which? it was hoping to reinstate cover, but there were no guarantees as insurers are looking to mitigate their own losses in what was an uncertain market.

As of 28 April, unemployment cover has still not been reinstated to new customers by any provider, according to ActiveQuote.

Accident and sickness cover revised

Unlike with unemployment cover, accident and sickness cover - in both long and short-term policies - remains widely available, but insurers have reacted to the COVID-19 epidemic with both restrictions and assistance to those struggling financially.

Some have imposed restrictions on applicants who have or might have coronavirus, with some temporarily excluding coronavirus claims on new policies.

Many have increased the length of time policyholders will have to wait for a payout.

We've detailed where the changes in the tables below.

Insurers revising income protection policies

Here's what you need to know about the changes to income protection policies for new and existing customers.

Customers on furlough

Six insurers have stepped forward with changes to their terms and conditions to provide cover for new applicants and those on furlough.

Below, we show what insurers have changed for new customers and policyholders on furlough.Policies vary in the percentage of salary paid out.

AegonNew applicants accepted. Policy based on applicant's full salary.
AIGNew applicants accepted. Policy based on applicant's full salary.
AvivaNew applications based on occupation, working hours and annual earnings as of 1 March 2020. Some 80% of salary paid if incapacitated while in receipt of reduced earnings.
Royal LondonCover based on full salary.
Shepherds FriendlyCover based on 80% salary claimed on furlough.
VitalityCover based on full salary.

Source: ActiveQuote 28 April 2020.

Payment holidays for income protection policies

Four insurers have stepped forward with new help for policyholders made vulnerable by the effects of the pandemic.

Some are offering payment breaks of up to three months in moves similar to those urged by the Financial Conduct Authority for mortgages, loans, car finance, high-cost credit and credit cards. However, the type of 'break' on offer varies between firms.

LV introduced its payment break scheme on 23 April for those made financially vulnerable by coronavirus. Up to 600,000 policyholders are covered by this new measure as this applies across LV's life insurance policies, as well as critical illness and income protection.

Policyholders unable to pay their premiums because they are suffering from poor physical or mental health, bereavement, abuse or facing homelessness may be eligible for this temporary support from LV.

Under the scheme, the cover remains in place during the payment break - meaning customers can claim as usual. With other payment break schemes - such as those offered by British Friendly, Holloway and Shepherd Friendly, cover is suspended meaning no claims can be made. However, policyholders can return to the policy when they resume paying without having to start a new policy.

LVFinancially vulnerable policyholders can stop paying premiums for up to three months, but can still make claims in that time. Open to customers who have had a policy for over a year with a good payment history, are not in arrears by more than three months and have seen earnings stop or drop significantly.
HollowayBetween 15 April and 15 July, policies can be put on hold for three months, but no claims can be made. Open to customers who have paid at least three monthly premiums and are not in arrears.
Shepherds FriendlyA payment break of up to six months, but no claims can be made. Open to customers with career break options on their policies and who have paid at least one premium.
British FriendlyA payment break of one to 24 months, but no claims can be made. Open to customers with career break options on their policies and who have paid at least one premium.

Source: ActiveQuote 28 April 2020.

Meanwhile, other insurers, such as AIG and Vitality, are offering temporary premium reductions in return for correspondingly reduced levels of cover.

The Exeter announces restrictions

One of the first income protection insurance firms to reveal changes was The Exeter.

It stopped providing income protection on claims for self-isolation on policies applied for on or after Tuesday 16 March for any claims - whether self-imposed or medically advised.

People who already had an income protection policy with The Exeter before 12 noon on 16 March could still make a claim for COVID-19-related medical self-isolation that followed NHS 111 guidance at that time. Any such payout, it said, was outside its normal terms and conditions.

The decision was posted on its website with half an hour to go before the cut-off point for new customers.

Wait times for claims lengthened

Vitality told Which? that it was still accepting new customers for income protection as long as they don't have coronavirus.However, claimants will have to wait at least four weeks until the policy pays out following a claim.

It described this as a small change that would only affect 'a very small amount of people'. The premium and cover remain unchanged. People who are showing symptoms of coronavirus, undergoing tests or have tested positive are having their applications postponed.

Six other insurers have stretched the times a policyholder has to wait before lodging a claim.

Now the vast majority of new customers will have to have held their policy for over four weeks before they can start to claim money.

Before the epidemic, five insurers used to offer accident and sickness income protection payouts from the first day of having cover for valid claims. These were British Friendly, LV, Holloway Friendly, Cirencester and Shepherds Friendly.

Six used to make payouts within the first four weeks but following the viral outbreak, only one, British Friendly, now offers payouts within four weeks of taking out cover, according to ActiveQuote.

Is protection insurance worth having?

If you're buying income protection, it's unlikely to pay out if you're ill for a short while or self-isolating.

Most policies, whether bought by an employer or by individuals, are designed for long-term absences, so they won't kick in until after a waiting period.

By then, illness or self-isolation may be over and you could be able to return to work.

They will only pay if you haven't been able to earn an income in that time, not just because you couldn't go to work, either because you were self-isolating or ill.

What to look for before you buy income protection

You can look for long or short term income cover either by going directly to the insurer or via comparison sites.

There are more than 20 insurers providing income protection, including Aegon, AIG, Aviva, British Friendly, Exeter, Holloway, Legal & General, LV, Vitality, Royal London, Shepherd's Friendly and Zurich.

If you're hunting for any form of income protection, it's vital that you understand when and under what conditions it will pay out.

Ordinarily, Which? recommends every adult of working age should consider taking out income protection, as only a small number of employers will support their staff for more than a year if they're off sick from work.

It usually pays out tax-free between half and seven tenths of your earnings, although there can be a cap.

It will only pay for as long as the policy lasts or until you can go back to work, whichever happens first.

Payouts are seldom immediate. Some short-term policies have paid from the first day, with others there can be a four-week wait, but long-term policies typically don't start until at least 13 weeks.

While considering protection insurance, you should also take into account the fast-evolving government measures being set out to ease cash flow in response to the economic impact of the pandemic.

How coronavirus is impacting life insurance

Life insurance can provide for those left behind after your death.

If you're struggling to keep up with your monthly payments, talk to your provider as soon as you can to see if you can have a payment holiday or reduce your instalments.

Life insurer LV has introduced a payment break of one to three months for life insurance policyholders experiencing great financial difficulties.

These are part of wider help across LV's other protection insurances covering critical illness and income protection.

During the payment break, the policy will remain fully in place. It is only open to customers who have held a policy for a year or more, have paid on time and have seen their income stop or drop significantly.

What to do if your insurer doesn't offer payment breaks

Payment breaks are down to the individual insurer's discretion. The options an insurer offers to help customers who are struggling with payments differ and an insurer may vary its stance depending on your circumstances.

If you have life insurance and your insurer isn't offering you a payment holiday or break keep paying even if you're tempted to put it on hold to cut costs.

You could lose your cover if you stop paying your monthly premiums and you're likely to struggle to find the same level of cover if you start another policy later on.

Typically, if you don't pay on time, insurers give you a grace period - before your cover stops.

If you claim for a period when you didn't pay your monthly premium, often the missing premium must be paid before you can receive the benefit. Some insurers will deduct the premium from the payout rather than insisting they receive the premium first.

Virtual medicals introduced for new applicants

AIG is now accepting virtual medicals for new life insurance applicants and LV is trialling virtual medical screening for potential customers who have disclosed certain conditions.

Find out more:what is life insurance?

Which? advice on coronavirus

Experts from across Which? have put together the advice you need to stay safe and make sure you're not left out of pocket.

You can keep up to date on the latest coronavirus news and advice with Which?

This story was originally published on 19 March 2020 and has been updated since then. The last update was on 8 June to clarify what was happening in the income protection market and to make clear the FCA's guidelines on insurance payment breaks came into force on 18 May.