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.
“It is only 5% of our business if that. Term assurance is still the one that is taken up far more because clients can establish the ins and outs easily.”
Skandia’s Jefferies said there was still strong demand for WOL and stressed that without the investment element WOL was still a strong product for IHT planning.
But he acknowledged the attraction of term assurance comparatively and added: “Where we may see more innovation in the market is where there could be a middle ground between WOL and term assurance, broadly speaking.”
Scottish Provident echoed the viewpoint. It stripped the investment element out of its WOL plans in November last year.
Building a new offering
According to the insurer, the investment WOL policies had been in significant decline and RDR had been the catalyst for building a new offering.
Jennifer Gilchrist, senior product development manager at Scottish Provident, said the majority of unit-linked policyholders, in recent times, had been taking out minimum investment-maximum cover WOL plans, as opposed to the maximum investment-minimum cover options which begged the question: What was the real value of the investment element?
Gilchrist agreed there could be potential in innovating the products to make them more flexible. For example, building in the ability to reduce premiums and sum assured, as well as the existing capability to increase them.
According to Gilchrist, innovation of WOL from here on in depended on how things worked through post-RDR and whether different client needs emerged and developed.
She said: “Perhaps it can be innovated to sit closer to term assurance. For example, people may think they want some cover when they reach the end of their mortgage term and term assurance cover. A conversion option on that policy into WOL would be good in that instance.
“I think the market is expanding. There is more thinking beyond just mortgage cover and actually questioning how WOL can work more hand in hand to build more holistic cover. It is about looking at the whole picture and advisers are central to that.”
Gilchrist continued: “For the most part advisers will probably just miss the investment element because they got used to what the product was yet from a simplicity angle, this product is now a lot simpler to explain to clients.”
It is too soon to tell the path WOL innovation may or may not take, but most would agree that a simpler protection product to explain to clients can only be a good place to start.
