While many in the industry are predicting the end of whole of life, others are questioning how, post-RDR, it can be used to build more holistic cover, Nicola Culley reports.
Place for wol
Michael Aldridge, sales director at London and Country, said the firm had noted the emergence of funeral plans in the past two years.
He said: “They are very similar products to WOL. They have grown massively. They do not require underwriting and a lot of marketing has gone into them.
“People might like the initial idea of guaranteed acceptance on funeral plans but there is a lot more to them.”
Aldridge added that advisers needed to “absolutely” explain to clients what they were getting with all product types.
“WOL is only a tiny part of business but there is definitely a place for it. Predominantly people want it for IHT planning purposes,” Aldridge said.
“But advisers need to uncover what exactly their client is after because WOL does only fit a small amount of people. Are they after just a lump sum on death? Because they may be better with term assurance.”
Even though most well-known providers have rid themselves of unit-linked plans, a recent Defaqto review showed around 11 providers were currently in the market, with many prioritising the product.
Where next?
But where next for the now-stripped back, cover-only WOL? A problem often cited by advisers in selling this is the attraction of cheaper term assurance. Advisers say the black and white nature of term assurance, fixed terms and the breaking of its links to the mortgage market trumps the cover WOL offered.
Aldridge said the removal of investment elements from WOL was no great loss, and the non-linked products were a very good product. He reasoned that most clients would only use the cover for IHT purposes.
He said: “Traditionally WOL was always used for IHT purposes but people wanted to get something back after paying in for so long. So when the investment element was added it became more of a hybrid product.
“It was never a great investment vehicle because if you wanted to invest you would look at more effective options, as opposed to something that sits alongside an insurance policy.
“These non-investment linked policies are good products and are useful in a niche but important place.”
Mark Robertson, protection partner at advice firm Chadney Bulgin, offered an opposing view. He said the loss of the investment option took value away from the product.
Client mind set
He said the argument against investment WOL plans was always: Are you actually getting enough back for it to be worthwhile? Robertson said the trouble with selling this aspect was the fact that only a crude calculation could be done, to roughly outline to clients what value the investment element may add.
But he added: “It is a product that is not advised on or recommended nearly as much as it was. I think the products are now less attractive without the investment element because people do want something back for the high price they pay out for the cover.
“For a lot of clients it is about mind set, they do not want term assurance because they want to get something back but when they see the cost of WOL they re-think and usually go back round to term assurance.”
