Dale Tranter, Misys IFA The only protection product on the list of potential Stakeholder products ...
Dale Tranter, Misys IFA
The only protection product on the list of potential Stakeholder products ' also including already 'stakeholdered' pensions and child trust savings plans ' is term assurance. No surprises here. The selection of provider is ' the odd suicide or war risk exclusion apart and assuming they all provide guaranteed rates ' 99% rate-driven, making pure term probably the only plan type an unsuspecting member of the public could buy without tears before bedtime. But even then it has to be distributed somehow.
In addition, it is not clear how 1% would work. If insurers were only allowed to add 1% to the pure risk cost of a product this would make it completely unprofitable. Similarly, if IFAs can only charge commission of 1% of premiums then it is not worth their while distributing it. I cannot see how this is workable on term assurance, let alone income protection, critical illness, long term care, or even mortgage protection, which are all advice products.
Peter le Beau, Le Beau Visage
The Government certainly thinks the 1% world is a good thing because charge-caps is one of the few areas it has remained consistent on with its pronouncements. Most people accept much of the logic for cheap, simple products. So we must conclude it is likely Stakeholder-style protection products may arrive.
I am in favour of competition, but I hope it does not go too far with a range of bland, vanilla protection products developing. The needs of people in all sectors of the market are diverse. My worry is that we focus on the price of everything and the value of nothing in a 1% world. If that devalued the protection market it would be a shame, and if that reduced the options the public have to buy products that meet their needs, it would be little short of disastrous.
Deepak Jobanputra, General Cologne Re
Protection business is often cited as a success as measured by increasing sales, however, penetration levels are not as high as they could be.
An attempt is being made to solve the affordability issue by a 1% cap on charges to avoid consumers facing hefty charges. This proposal of the '1% world' has created a big challenge for our industry. The limited success of Stakeholder pensions suggests that it may not be the answer to extending the market for self-provision. However, the Government remains committed to it.
There is an opportunity for a standardised set of products to be made available that would require little or no advice. This may appeal to a segment of the market where affordability is an issue. The removal of costly advice and a structure combining simplicity of benefits and easy access could work well. There will obviously be practical issues of achieving this, including how this suggestion would interact with a full advice model. To achieve low-cost products it is also important to have light regulation and compliance without compromising or exploiting policyholders' rights.
Helen Collins, Liverpool Victoria
The recent consultation document jointly released by the Treasury and Department for Work and Pensions indicates it may be difficult to provide good, quality protection products in the 1% world. It is difficult to see how this would work and the Treasury agrees. The 1% would usually come from the investment element, but protection products rarely have an investment element, so how would a 1% charge actually work? Would it include the monthly charge, mortality costs, reinsurance costs, or distribution costs, for example? And even if there was an investment element, it is likely to be small in comparison with the protection cover.
Another point is the simple approach that the 1% Stakeholder products take. It is certainly unlikely such a simple product would meet the more sophisticated consumers' needs. Fortunately the Treasury appears to have recognised the potential complexity that protection brings.
It is laudable costs are cut and prices are keen, but not at the expense of quality. Cheapest is not always best.
