AXA's pre-funded product will close to new business by end of year
AXA Lifetime Care has pulled out of the pre-funded long term care (LTC) market, reducing vital competition in the already dwindling sector.
The provider will close its LTC insurance arm at the end of the year to focus on the immediate needs market, which is seeing substantial growth. It blamed falling demand for the decision.
Brian Fisher, marketing manager for AXA Lifetime Care, said: "According to the Association of British Insurers, annual sales of pre-funded business fell by nearly 60% from 8,080 in 1996 to 3,432 in 2002. Our own experience mirrors this and that is why we have made the decision to concentrate our efforts on the immediate needs market."
The move leaves just a handful of providers still operating in the market. Yet, those that remain appear confident that AXA's decision will not sound the death toll for the rest of the market.
Major player Norwich Union is still actively marketing its pre-funded product and claims sales could be about to see a lift from forthcoming Financial Services Authority (FSA) regulation.
Dean Critchfield, retirement marketing manager at Norwich Union, said: "It is disappointing news as AXA is a major competitor which had been trying hard to stimulate market growth - that hasn't really happened in this sector for the last few years.
"Hopefully we will see growth from FSA regulation and the regulator will look at promoting the market to the public."
Despite falling sales figures, a new pre-funded LTC product was recently launched by Pension Annuity Friendly Society (PAFS). Graham Fidoe, chairman of LTC broker body IFACare, remained confident the market has a future, as long as more advisers include it in their remit.
"We welcome the recent launch of the PAFS pre-funded product, which slightly evens out the loss of AXA to the market. And hopefully over time I think we will see more providers enter the market. Forthcoming regulation should give consumers the confidence that contracts are being properly sold and help encourage product innovation. AXA's decision does not mean the end of the pre-funded market. However, the key is advice. People want advice and the need for advice is going to grow," he said.
Quotes for new pre-funded business from AXA will not be given after 31 December 2003 and new applications must be submitted before 30 January 2004. All existing pre-funded policies will continue on their existing terms.
