The whole of life (WoL) market is seeing growth as it emerges from the shadow of earlier decline, writes Thomas Smith
Long-term care
Casey said of Ageas Protect's forthcoming product: "We're looking to introduce a long- term care rider to the contract. All you have to do there is look at the ageing population and see the need is growing
and will continue to grow."
Hamilton, whose firm Zurich are also looking to launch a WOL plan with care options, said: "Growth next year may be buoyed by the potential to provide some financial assistance in the case of long term care needs.
"There's no doubt there is an expectation from regulators and others of product innovation in the long-term care space. I'm not sure we'll see that directly in terms of asset accumulation. Most people don't save enough for their pension, and they can be pretty sure they'll retire at some stage. "If they aren't encouraged to save for their retirement, something they might want to look forward to, it's much less likely they'll save for long term care, something they hope won't happen to them.
Hamilton added: "The provision funding of long-term care is one of the major challenges we face as a society, and there will be different ways of approaching it. For some who have existing assets, immediate needs annuities or equity release may be the answer, but we also believe there is a place for an insurance based solution for those who don't have the means or the desire to build up the appropriate funds in advance."
Colley described care options as "an interesting move", she added: "You can argue it's responding to customer needs, now most people now at a certain point will require some form of long-term care, that's been an interesting move in the market, it's a good move and I think it's something that should be more greatly explored."
Colley continued: "Historically the tendency was for it to be investment backed. The challenge is always got to be around whether it is a true non-profit investment-based WOL plan or is it an investment-based WOL plan? That's one that's quite dangerous in terms of the assumed underlying sums and performance, to make sure there is an adequate amount of money there to provide that care.
"As long as the guidance and the guidelines are designed to avoid any disappointment in the future I think that it can only be a good thing."
"Offering it as a long-term care opportunity opens up more of a target audience that can access these products for different reasons."
Casey added: "There's a greater understanding and awareness of the need for long-term care and education provided by the insurance companies to the distributors around long-term care.
"Some of the distributors we've spoken to are really interested in the area of WOL planning. It's an area they would be concentrating on, and it's a natural bedfellow if you think about it, with some of the wealth managers, you're creating the wealth then you've got to protect that wealth and also the individual's health needs."
Lakey added: "The theory sounds fantastic. You've got a plan that you can convert to cover care home costs and so forth. Going back to about 2001/2, there were around five or six specific care cost plans on the market, which were effectively WOL plans dressed up."
"They fell down because they didn't actually offer what people wanted. If I said to you: ‘here you are you're 83. Here's a plan that, if you have to go into a care home will pay out the care home costs until unfortunately you kick the bucket.' Now that sounds a pretty decent conversation but there isn't a plan out there that does that.
"What they say is ‘we will pay a certain amount of money until it runs out, then tough luck.' That isn't so attractive. What's been achieved there is I can go into a nice care home for three years then I'm booted out into the council one. I don't see that as solving the problem, I see it as exacerbating the problem, and it's for that reason that these plans didn't take off.
" Unless there's some design change that allows a degree of certainty then I don't see them taking off. I'm not saying it can't happen but as of yet it hasn't happened. To provide certainty, you've got to have a premium that could be a bit spooky."
IHT
IHT planning remains a driver of sales at the higher value end of the market with trust arrangements offering clients the option of life cover that will meet their needs.
Casey said: "IHT mitigation and WOL products, especially on a last survivor basis, make an excellent IHT mitigation vehicle and if you look at some of the figures around estates and IHT bills,
in 2010/11 the average IHT bill reached £166,000 and £2.6bn went to the revenue in inheritance tax. There's an opportunity for people to mitigate their IHT bill."
Casey added: "I suspect that initially the emphasis [of sales] would be on IHT cover, probably because the emphasis on this whole area of the market is really up in the air at the moment given the changes in the pension rules and regulations. We'll have to see the final details in the budget and understand the implications there."
Colley said: "You've got to remember that when it comes to IHT planning there's more savvy ways now of mitigating the need for inheritance tax planning. Having a WOL plan is one solution but there are other ways a customer can manage their portfolio and IHT liability, besides WOL, which is one option."
Lakey said: "Your off-the-peg plan probably won't suit everyone. For those people who are looking for IHT planning, we're talking of high sums assured. We're also talking about people who can afford it and people who are looking to make sure it's written in trust for the benefit of children."
Hamilton said: "The use of WOL in IHT planning remains important and more people are being drawn into the IHT net. Here we can see some large sums assured.
