When addressing a client's protection needs, most products deal in the term space. But with people potentially outliving these contracts, Owain Thomas looks to whole of life for rejuvenation.
“So, there will be some disgruntled people who will be easily persuaded by CMCs to put in complaints and the question will be ‘Was this flagged that it could happen?’ What would the Financial Ombudsman Service (FOS) do with that?” he concluded.
As a result of these fears, Lakey has vowed that any WOL business he does will only be with guaranteed premiums products. But is this a likely event or simply preparing for the worst case scenario?
Mick James, business development manager at RGA, has some sympathy with advisers and customers facing substantial increases at review. He accepts this is a burden for the adviser force to tackle.
“If it is sold as a reviewable contract, consumers should expect it will increase and advisers should be in a position to set their expectations about where this might go,” he said.
“Clearly, it is going to be a bitter pill to swallow for many consumers as nobody wants to see their premiums go up.
“That’s just the way it goes, but it is around customer expectations, and if it is properly sold and properly advised, then there shouldn’t be any issue for you.
“I think a lot of the liability will lie with the advised sales process and being able to demonstrate they had an appropriate level of disclosure around that product,” he added.
However, James suspects there will be “another area of the market that will become a FOS flash-point faster”, although he isn’t yet able to cement any firm predictions about where this may come from.
This aside, James is fascinated with the current market and its relationship with present longevity and economic trends. He is convinced there is space for it to grow given the right nurturing and targeting.
One development being examined is the integration of a new breed of WOL products on to wrap platforms. This would enable wealth management advisers to see all their client’s assets in one place and use a reviewable plan to change as the value of the estate changes, potentially daily.
Feeding into growth
Although this would be a positive move for the WOL sector, the market still appears limited in its potential size when considering inheritance tax (IHT) planning purposes.
According to HMRC statistics, only 15,000 estates became liable for IHT in both 2008-09 and 2009-10. That figure is expected to grow slightly to 16,000 when fully audited totals for 2010-11 are known.
As James explained, those 16,000 cases are all likely to have their own IFA so are likely to be a “very real” sales opportunity.
However, this market number is also being squeezed by a trend in longer running term assurance products.
“There’s definitely a move towards longer maximum ages at expiry,” he said.
“We’ve already got term contracts that can run out to age 100 – effectively a WOL contract – but in the mainstream, it is fairly common to get it to 85 or 89. With some of these, you can take out a 40- or 50-year term expiring at age 89.
