Question: What lessons can the UK unit-linked guarantee market learn from the more established markets such as the US and Japan?
Answer - Colin Bell, European variable annuity product director, Aegon
Probably the main learning is that an existing ULG proposition from an established market in another part of the world can't just be transplanted into the UK market and be expected to be a success without tailoring of the benefit design and charges to fit the circumstances of the UK market.
Each country has its own tax and savings regime; regulatory framework; level of State provision; demographic fingerprint; savings culture; alternative savings vehicles and attitude to risk, all of which can affect the relative attractiveness of different types of guarantees. For example, capital guarantees are very popular in Japan although hardly used in the US (where lifetime income guarantees are the most popular benefit given the needs of the large at-retirement market).
Secondly, it is vital to understand the distribution dynamic and exactly who is the main 'customer' for marketing purposes - the distributor or the end consumer. In the US there is heavy wholesaling to advisers whereas in Japan the marketing effort is generally focused on the end consumer.
Thirdly, the need for continued education and training for advisers, particularly in the early market growth phase, of customer needs in typical retirement savings scenarios and of the benefits and solutions that ULGs can offer. The US market in particular has shown the need to keep reinforcing the messages, especially where advisers are writing cases only occasionally.
Fourthly, the benefit in terms of increased growth momentum from having domestic insurers enter the market to join the first movers - who in Japan and the UK have tended to be existing US players or insurers with US ULG market experience within their group. It typically takes several years to really generate market momentum and get through the learning phase to the point of channel acceptance and adoption.
Finally, that the progress of growth can be disrupted by volatile equity markets, even though you could argue that this is the time that really brings home the value of guarantees. It is important during these times to maintain key product and sales features even if guarantee charges or benefit levels change.
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation