On the face of it, protection products seem ripe for repackaging into Stakeholder-style plans. They ...
On the face of it, protection products seem ripe for repackaging into Stakeholder-style plans. They are less complex than many of their investment cousins, so lend themselves to mass marketing with little explanation or advice being needed. The market for protection products has also become increasingly competitive in recent years, helping affordability.
The UK is also massively underinsured, clearly presenting a 'gap' which the Government and insurers would be keen to see addressed.
However, you do not have to scratch too deeply to discover some potential issues. Pure term assurance, when explained, is quite straightforward.
Beyond this simple product it is hard to see more being offered without additional sales advice being necessary. This will need to be factored into the product's cost.
Savings contracts are costed as universal offerings with the only variable being investment amount and duration. Protection contracts have more factors to take account of in determining the price including age, gender, smoker status, medical history, occupation and hazardous pursuits.
These factors all affect cost. In addition, unlike mortality-based business, the cost of morbidity-based protection products is not falling.
Perhaps the biggest barrier of all is the market itself. Someone will have to pay to promote these products and with tight margins there is only so much the product provider can afford to spend.
Given these issues it is difficult to see how the 1% capped Stakeholder concept could be applied to protection products.
