Term assurance is the most black and white protection policy. Have we seen any colour in the market over the past year? Fiona Murphy investigates.
Mason explained: “The recession has an influence. Change of job is a factor. I’m going to see a client who was made redundant and started their own business. Now the business is doing well and they need protection. With their previous job, they had a protection package with it, and they’ve realised they have no protection for their family.”
Meanwhile, demographic change has played its part. As the age of first-time buyer is driven up, so too is the average age of someone taking out a term assurance policy.
Weedon explained: “We’re getting slightly older clients, aged over 50 coming to us, and the cover is going on that bit longer as well. The stereotypical £100,000 over 25-year term isn’t what people need now. Some people reach 50 and they’re taking out a new mortgage so they need cover.
He added: “Now you’re dealing with a population where one in three marriages break up and people taking on mortgages later. We’re dealing with a very different marketplace. Retirement age has gone up. People are leaving home and settling down later. With the ageing population and the way trends and lifestyles are changing and with more people having two marriages or relationships, it has meant the second-time round, it has to be sold rather than bought to younger customers. But when you’re older, you’re a lot more pragmatic and people are in a different place financially. That’s helping the market in some ways, whereas previously young people didn’t want to think about term assurance.”
Time for a review
You can’t really mention term assurance without thinking about meerkats or tenors. The proliferation of comparison sites has shaped and polarised how providers and the adviser market have carried out business in recent years.
The Financial Conduct Authority has recognised this and said it will undertake a review of comparison sites to ensure consumers are not being “misled” into buying unsuitable products or add-ons. The review will focus on 14 websites covering 90% of the market.
Responding to the forthcoming review, Peter Plumb, chief executive of MoneySupermarket.com said: “As an independent price comparison site our business model is aligned with the FCA’s objectives. We welcome their review and any regulation which is good for customers.
“Customers have different needs, nearly half of our customers do not buy the cheapest product on the market and prefer to select on features or brand.
“We are a free service to our customers. We do not receive a commission for our services; we do, however, receive a small flat fee for every customer who buys a policy which is completely independent of policy value.”
The results of the FCA’s probe will be published later on this year and should shed some light under the bonnets of comparison sites. Perhaps this could provide advisers with a real opportunity to fight their case in broking term assurance.
Aside from the review into comparison sites, what else does 2014 hold for term assurance? With mortgage- linked sales already growing in popularity, the Mortgage Market Review could have a real impact, because it cleans up how brokers do business.
Weedon sums up some of the key opportunities and challenges for term assurance over the coming year.
He said: “The help to buy schemes came out this year so we might see a bit of stimulus with term assurance next year on the back of interest from the mortgage brokers. Also, gender was a big thing 12 months ago. It was a bit of a storm in the teacup, but it will be interesting to see what the stats were for 2013 compared with 2012. Anyone who was re-broking probably struggled a little bit. It was a bit of a fire sale with brokers saying ‘Buy it now while stocks last’, when the reality was ‘Buy it now as we won’t be able to churn it next year’. We don’t do that.
“Anyone who had a reliance on a four-year earning income would have seen their income fall because now they would have to rebate commission. Is that a sustainable model long term? Probably not. It’s the age old question, is a new bit of business someone who hasn’t got any cover or business with say Moneysupermarket or Confused and then I write it?”
He also says he would like to see new entrants coming into the market. Perhaps term assurance could have a bright year after all.
