The whole of life (WoL) market is seeing growth as it emerges from the shadow of earlier decline, writes Thomas Smith
Over the past year, there has been an increase in activity in the Whole of Life market with new product options and different providers reporting growth in sales in these alongside funeral plans.
With the expansion of policies for advisers to offer, there are providers in the market who are now looking towards future growth.
Meanwhile complaints about WoL and savings endowments to the financial ombudsman service were down by 24% in the year to 31st March 2014.
This is good news for the market given that it had faced significant decline in sales and sentiment. Swiss Re's Term & Health Watch 2014found that the whole of life market saw a reduction of 20.5% in 2013.
New product sales at 273,423 were below their level in 2011 of 400,682, the highest reached in the last five years, and 2013's figures were the lowest of the last five years. The vast majority of these remained guaranteed acceptance schemes, non-linked products have seen a rise from a low in 2011 of 14,245 to 26,411 in 2013, giving advisers more business.
Ron Wheatcroft, technical manager at Swiss Re, said: "We think there's real scope for coverage later in life because that's just the way that society's moving. We've got quite a positive view to WOL cover, and the market potentially could grow. It should be a very strong place for advisers."
Louise Colley, protection director at Aviva, said the WOL market had seen "peaks and troughs". She added: "I think there's been a significant drop in WOL if you trend it out over the last ten years. Last year there was a slight increase which I think that was predominantly down to guaranteed WOL advertising which tends to be strong but it's nowhere near where it used to be."
Meanwhile Peter Hamilton, head of retail propositions at Zurich, said there were other factors at play suggesting future growth trends.
He said: "My sense is that the Whole of Life market over the last year will be up when the figures are in, influenced by increased consumer wealth and more falling into the Inheritance Tax (IHT) [catchment].
"There are obviously different strands to the market: from the low premium funeral segment to the bigger ticket IHT planning, as well as a guaranteed acceptance plan market.
"It's not obvious that the market will be dramatically different next year, though I'm sensing that more advisers are getting involved, and we're seeing new online firms emerge who are actively promoting this kind of cover to consumers, so I'd hope to see some growth here."
Meanwhile, price has always been a factor in the market's performance. Alan Lakey, partner at Highclere Financial Services, said: "The challenge to the WOL market is the fact that it's expensive. The difference between term assurance and a WOL plan is one of risk: with a term assurance you may die within a certain period, with WOL you will die, it's just a question of when. It must by default be more expensive than a term-based plan."
Lakey added: "For those people looking for funeral costs, the growth area for the last year or two has been the guaranteed non-medical plans, the nasty plans that people like AXA have been selling direct to clients with a picture of Michael Parkinson on the cover holding a carriage clock. They sell thousands of those.
"The magic words are ‘You will not need a medical', and sometimes they also say ‘no salesmen will call on you'. Those are nice friendly terms for many consumers. What the consumer doesn't know and in some cases probably doesn't care about, is that were they to approach someone like me and say ‘I would like to see if you could get me better value for money' then I can more than double the sum assured for the same premium, the difference is they might have to give out their health details."
Developments
In July, Zurich made its underwriting and application processes available online, and according to Hamilton, 80% of the company's business is now conducted through these channels.
Hamilton added: "There's probably been a bit more growth in the funeral planning end of the market. Certainly that's what we've seen. That's probably helped from our own perspective by the fact that we introduced an online capability which makes it easier for those smaller sums assured in particular to get the business through and issued quite quickly. From our own perspective we've seen more at the lower end but still ongoing large volumes at the higher end on the inheritance tax."
The past year has seen the arrival of new policy options and policies, with Aegon entering in late 2014 offering an integrated trust option with the policy. The company has reported a "fantastic" start to their entry to the market.
Dougy Grant, protection director at Aegon, said: "More wealth advisers are starting to consider protection solutions for their clients than they had done previously and we're certainly feeling the positive benefit of that."
They are not the only company planning to enter the WOL marketplace, with Ageas Protect also planning a future WOL product for the market.
Steve Casey, head of marketing & propositions at Ageas Protect, said that Ageas had entered the market to fill a gap in their product range.
