According to the Swiss Re Term and Health Watch 2012, term sales in 2011 were 1,488,106; whole-life sales were 400,682, of which 385,132 were guaranteed acceptance plans.
Other than funeral plans, about 14,000 non-linked plans were sold via all channels in 2011 – about 1 per cent of term sales. This hardly suggests there is a need for a simple whole-life plan – unless advisers have got it horribly wrong.
VERDICT – Simple life products are not required
Income Protection
There may be a need for a simple savings product; there is no need for a simple life product, but there certainly is a need for a simple income protection product. I am delighted that Ms Sergeant agrees with this and has included the product in the next stage. Do not underestimate the task. Arguably, the best income protection cover is group cover where a firm insures its staff. Rates are much lower and free cover (another odd expression) means that most members can be included without any underwriting.
VERDICT – Success is essential
As mentioned earlier, the standard terms and conditions approach is flawed. Products designed by committee do not work. The last such effort was stakeholder savings plans.
Who will design the products? Ms Sergeant has given this role to the trade associations, the British Bankers’ Association, the Building Societies Association and the Association of British Insurers. Trade associations are legitimately in business for the benefit of their members. They have no consumerist role. To ask them to facilitate specifically consumer-friendly products is an odd choice, especially the BBA after PPI, interest rate swap mis-selling and rigging of Libor rates by some of its most prominent members.
The work on development of the Simple IP product has been passed to the ABI. Apart from the issues around being a trade body, the ABI has hardly covered itself in protection glory by replacing its protection chief, Nick Kirwan, on budgetary grounds.
There are further challenges for them: IP will always be a more complex subject because there are very many more personal variables in protecting someone’s income than in providing for your family when you die or putting money away for a rainy day. Here, people do need advice and guidance, but the great majority will never visit an adviser so the issue is how can that guidance be delivered through all possible channels, for example, personally, online or in the workplace.
I am also concerned at the proposal to offer benefit terms of one, three or five years only and not to normal retirement date on the grounds that this would be expensive. The consumer should decide whether anything is too expensive or not, not the industry. This is very odd when looked at alongside the decision to include a whole-life policy.
