VitalityLife has launched two whole of life (WOL) plans with upfront premium discounts of up to 67% and made changes to term cover as the insurer described WOL as an "undervalued product."
One WOL plan is called the Interest Rate Optimiser - it provides an upfront premium discount with annual premium increases dependent upon long-term interest rates.
The second plan, Premium Optimiser, provides an upfront premium discount with fixed annual premium increases of 2.5%.
Speaking at the launch of the products at the Banking Hall in London, Justin Taurog, managing director of distribution and sales at VitalityLife said the policies were designed to bridge the pricing "gap with term assurance".
Depending on the client's age, policyholders can receive a discount of up to 67%, VitalityLife said.
The policies also will give policyholders the ability to adjust premiums and rewards based on their engagement with the Vitality programme.
Taurog said the new polices are also designed to boost commission levels paid to advisers "to recognise the value of advice".
Term assurance
Meanwhile the insurer also said it was reducing premiums by up to 6% (or up to 30% on some cases) on its Term Life Cover policy.
The maximum age for Term Life Cover will be extended to up to age 90 (previously age 80.) The maximum term has been extended to 70 (previously 50.)
Under-valued product
At the launch of the policies, Herschel Mayers, chief executive of VitalityLife [pictured] described WOL as an "under-valued product" as people were living longer but term assurance still continued to be the more popular product sold across protection market.
He said: "As a society people are living longer, maybe in ill health and they may require care needs. There has been a massive shift of accountability onto the individual.
"We have seen the move from DB to DC in pensions and the transfer of risk onto the individual. I think there is an obvious need for customers to have protection for their whole lives. If you look at what's happening, the percentage of WOL products sold is relatively small.
"About all 25% of all products sold are WOL - 89% of those are small sum assured guaranteed plans or funeral plans while 11% are underwritten WOL plans. I believe there is a dramatic requirement for us to meet our customer's needs.
"Why aren't people buying WOL instead of purchasing term assurance? I would say that comes down to affordability, term assurance is significantly cheaper than WOL.
"For a 40 year old, a WOL policy for the same sum assured would cost four times that of a term assurance policy at age 65."
Mayers said that interest rates, capital requirements and health programmes were traditionally used by the insurer to price WOL.
He added: "Interest rates are the lowest they have been for 320 years - that will have a negative impact on WOL policies. If someone takes up an insurance policy today priced at those low rates, they are going to be locked into those interest rates.
"Analysing those 3 components and taking into account physical activity and engaging with the Vitality programme, how can we make sure policyholders aren't rocketing into low interest rates and how from a capital point of view [Solvency ii), how can we maximise capital efficiency?
I believe the shared value model [that Vitality uses] is an ideal platform for us to ensure we can meet those challenges. Today we are going to show you how we meet these challenges.
"We have launched the Interest Rate Optimiser which results in a net result of up to 67% discount from your WOL premiums."
