Whole of life (WOL) sales are generally declining, but it could be used to meet changing needs. Fiona Murphy takes a closer look .
WOL plans have had a rough time of late. Swiss Re figures showed a 14.1% decrease in 2012 sales due to a change in providers' marketing emphasis. But is that the fullest picture of what's going on?
The market generally falls into two types. The first is the over-50s plans, many featuring funeral arrangements and leaving a lump sum for beneficiaries.
The other type of contract is sold by insurers more likely to grace the pages of this magazine. Most of these products once had an investment-linked element, scrapped in anticipation of RDR, to become pure ‘protection' contracts sold by a wider number of advisers.
Commentators say that WOL plans, in whatever shape or size, should be considered more widely.
Maria Harris, sales director at Engage Mutual, said the firm's over-50s plans had seen an increase in sales volumes and the number of advisers placing business.
"There seems to be a mind-set shift that simple, pure protection products are moving away from being low value and low integrity towards being an important part of offering a range of products that suit customer needs. The WOL market has traditionally been more direct to consumer, but as advisers have diversified their models and looked at ways to embed value in their businesses, we've seen an increase in demand."
But what about complaints made in recent years about reviewable WOL policies or over-50s models?
Nick Kirwan, director of care funding advice at ILC-UK, said: "They were criticised, I think a bit unfairly, for not providing great value for money. My sense is that this is not right when people do the comparison of average age of death which, at the moment, is 87.
If you looked at the life expectancy of the group of people buying those 50+ plans, it would be a lot lower than that, because there's a natural bit of anti-selection as they are not medically underwritten. Also, many people come from a lower socio-economic group, so you would expect them not to live as long as average mortality."
Multi-usage
Jennifer Gilchrist, senior product development manager at Scottish Provident, said WOL plans are more "multi-usage" than before.
"In the past, a consumers' legacy to their children would be their house. Now there isn't the ability to pass on wealth in the same way. WOL wasn't just a product to save an IHT bill, you could use these products to leave a legacy to your family if you sold your house or were downsizing to fund retirement."
Phil Jeynes, head of account development at Pruprotect, said: "We try to move the debate away from IHT. There's nothing wrong with that, but when you look at the stats, a huge proportion of people are taking mortgages past retirement age and have debt. Everyone is aware of retirement age being pushed further back, so having CI or term where it runs to a defined age such as 65, it's clear people need cover throughout their life."
Gilchrist agreed: "WOL is more expensive than term, but if you think you'll have a need beyond the mortgage being paid off, taking it out when you're 25 years older can be very expensive."
In a nutshell it could be attractive for people taking out protection for the first time.
Innovation for fees
Kirwan asks whether innovation is needed to help people pay long-term care fees.
"We have seen the introduction of the care bill and I wonder if there isn't some scope to build on those products, and provide people with the ability to pay for their care," he said.
"We do need to be careful about these products in the way society is changing. As we're all living much longer, and life expectancy is going up, more of us end up with an unhealthy period at the end where we need care.
"The future projections say that three in four of us are going to need care. The way the system works, if we need care, you're expected to pay all your income towards care. How are you going to afford to keep the premiums going?"
What opportunities could whole of life policies have within the next few years?
For Gilchrist, with greater opportunity in the mortgage market, WOL could be on the agenda, but only if people have more disposable income.
Harris said: "We expect to see whole of life becoming even more important in the adviser market as the protection gap continues to grow, more customers are alienated through the changes to bancassurance models, and in response to a growing demand for simple, straightforward, easy to access products."
So there could be life in the old dog yet.
