Is it time for intermediaries to look at whole of life cover as more than an Inheritance Tax planning tool and to take a multi-usage approach, asks Jennifer Gilchrist.
In short, although they can be good value for those with poor health records, over 50s type plans have about as much in common with the type of whole of life policy under discussion as the Mayan calendar has with the insurance field as a whole. We are talking about the difference between dealing with sums assured of two or three thousand pounds and of two or three hundred thousand pounds and of the difference between products that are individually underwritten and those that aren’t.
The fully underwritten products, which Swiss Re data shows have experienced dwindling sales during the past couple of years, subdivide into two groups: unit linked plans, which are heavily dependent on investment and other assumptions; and non profit policies, which simply pay out on death a fixed sum assured agreed at outset.
Both approaches definitely have their merits and at Scottish Provident we have divided loyalties because, with effect from November, Scottish Provident will be replacing its unit linked Pegasus Whole of Life plan for new business with a version which will not be unitised and has no investment element.
Cutting out the investment risk to the consumer gives the product a valuable new degree of simplicity. There will be a choice available between guaranteed and reviewable rates and, even though those who opt for reviewable rates will still be subject to rate reviews after 10 years and at subsequent five yearly intervals, they will not actually have to make any investment decisions.
At the end of the day, the decision as to whether to opt for the extra cost but extra security of the guaranteed-rate option will always be a personal one and, while it is to be hoped many people will see the value in guaranteed rates, it is expected the reviewable rate format will prove popular in the current economic climate.
