While many in the industry are predicting the end of whole of life, others are questioning how, post-RDR, it can be used to build more holistic cover, Nicola Culley reports.
When RDR finally took hold of the industry in December last year, most major insurers had closed their doors to new unit-linked, whole-of-life (WOL) business.
Some regard the loss of unit-linked options as another nail in the coffin for the already dwindling WOL sales. But Scottish Provident, one of the last big names to scrap the investment element, was not alone in arguing that, limiting WOL distribution to RDR-qualified advisers only served to restrict take-up even more.
Many however, do come together on questioning the real value in the WOL investment element and the high-price barriers to take-up. And insurers look set to respond by pitching WOL innovation somewhere closer to the more appealing simplicity and affordability of term assurance.
Swiss Re's annual Term & Health Watch survey shows total new sales of WOL cover increased by 7.9% in 2011 and 16.8% in 2010. At face value, numbers look positive.
But in reality the reinsurer's figures include guaranteed acceptance plan - also known as over-50s funeral plans - which, according to Swiss Re, made up 385,132 of the 400,682 WOL policies sold in 2011.
Ian Jefferies, head of protection at Skandia UK, said the decline of unit-linked plans - to a mere 1,300 in 2011 - began with the closure of the direct sales forces from the late 1990s.
He said the fall had since continued with the gradual separation of protection from investment, as platforms and sophisticated fund choices grew, adding RDR was the final nail in the coffin given investment-type plans now fell under rules requiring fee-based adviser remuneration.
Meanwhile,according to Skandia, non-linked plans have fared only marginally better with only 14,000 cases sold in 2011; a fall of a third from 2010. Skandia also pointed out, however, that industry data showed more than 385,000 funeral plans were successfully marketed in 2011.
No-hassle buy
Most in the industry have put the rise in funeral plan sales down to a noticeable bump-up in marketing, complete with celebrity endorsements and Parker pen gift incentives.
This drive is compounded by an appealing selling point, the plans offer guaranteed acceptance and therefore are a no-hassle buy. The products are, broadly speaking, bought to cover funeral costs and leave small family legacies. Demand is expected to keep growing.
Jefferies said: "Funeral plans pay out relatively modest sums assured for a less modest monthly premium of say £15 to £20. And they typically come with a two-year moratorium, so within that period there would be no pay out - only a return of premiums. Yes, they are guaranteed acceptance but the question, as always, has to be are they adding value for money?"
He added that policyholders could wind up in a situation where payments had been made for many years after which any return received may not exceed the premiums paid.
