Jennifer Gilchrist, senior product development manager at Scottish Provident, explains why there may yet be life in the recently unloved whole of life plans
In today’s protection market, advisers have a choice of term or whole of life cover to meet the needs of their clients. Up until now, term cover has primarily been used to provide mortgage and family protection, with whole of life (minus funeral-type plans) left for high net worth clients with inheritance tax mitigation requirements.
In the UK, about 16,000 people incurred an inheritance tax (IHT) bill from HM Revenue & Customs (HMRC) in 2010. This may seem like a high figure but when you consider that more than 860,000 term plans were written in 2010, the current whole of life market is relatively niche. But perhaps it is time to look at whole of life as much more than just an inheritance tax planning tool.
The way it was
In recent years, the whole of life space has been divided up into three main areas. The first and biggest part of the market is currently the over 50s immediate acceptance market, commonly referred to as funeral plans. Swiss Re quoted the number of new over 50s plans in 2011 to be 385,132 out of a total of 400,632 across the whole market. While these plans can be good value for those looking for immediate cover with no health questions, they do not have much in common with other whole of life plans that cater for high sums assured and where medical evidence is required. The over 50s plans typically have an average sum assured of £3,000 and an average premium of approximately £200 a year.
The second part of the market is guaranteed and reviewable, fully underwritten, pure protection, whole of life plans. This market has slowly increased in size during recent years, with 2011 showing a marked expansion.
Last is the traditional whole of life plan – fully underwritten, unit linked and investment backed. This type of product has been in decline for years, with the market almost halving in size from 2,513 in 2010 to 1,305 plans set up in 2011. It is highly likely that this year nearly all providers with products in this area will either announce changes to their propositions away from investment-backed plans or withdraw their products entirely.
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Speaking at PA360 North
Speaking at PA360 North
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