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A consumer&#39s view

The insurance industry has taken a battering in rec-ent years from consumers, the regulators and the Government.

Yet the Government is keen to see insurance products step into the breach in the areas where it is pulling back from social provision. And there are opportunities out there.

Stakeholder pensions are the most obvious example but, with a 1 per cent cap on charges, there is not much margin for profits in this highly competitive business. However, there are at least 10 million would-be buyers of stakeholders so it is a big market.

Meanwhile, the mortgage lenders have had some success in persuading the insurance industry to provide aff- ordable mortgage payment protection policies for homebuyers who face financial disaster if they are sick or unemployed.

And there are all the signs that take-up of MPPI is improving and an increasing number of borrowers are opting for the security of cover. With the vast majority of these policies sold by the lenders, distribution costs are low and there is room to make money in this market although not vast amounts.

The Government has handed the general insurers another opportunity with the news that it is to cut back on the numbers of homeowners who qualify for Legal Aid.

At the moment, only equity in your home in excess of £100,000 is taken into account when assessing an applicant&#39s capital and eligibility for Legal Aid. But the proposal is to reduce this threshold so that anyone with equity of more than £3,000 in their home would no longer qualify for legal aid.

This is a golden opportunity for insurers looking to hang on to their increasingly disloyal household policyholders. They could offer improved legal fees cover as an incentive to stay.

Most household policies offer some legal fees cover, either at a relatively low level of between £25,000 and £50,000, or it is on the menu as an optional extra. The problem is that terms and conditions are very restrictive.

Now is the time to major on the huge legal fees bills that householders could face and improve the cover, even if it means upping the premium.

Once homeowners realise that they could be forced to sell their home to pay for an expensive legal action, they would be much more inc-lined to buy, even if it did cost a bit more.

Perhaps the biggest mystery of all, though, is why the Government does not introduce tax incentives to insure against the cost of long-term care.

Costs of caring for the elderly are rising at an alarming rate and it is plain that the National Health Service simply does not have the resources to cope with the strains – let alone the costs.

It is simply common sense to grant tax relief on prem-iums paid for insurance to cover the cost of long-term care.

If the Government is worried that the insurance industry would be up to its old tricks of combing a savings policy with long-term care cover, it could restrict any tax relief to pure protection policies – the sort that pay out only if you go into a residential care home or need full-time nursing. If you don&#39t – you get nothing.

This is, in any case, the only practicable way for those on average earnings to provide for this eventuality. If they could afford a savings-type policy to fund long-term care, they would simply put it into a pension scheme.

Tax relief ought to be available on premiums for long-term care protection, not just for the policyholder but also for a son, daughter or other relative who is paying the premiums on behalf of a member of their family.

This would be much more justifiable than the current ludicrous situation where tax relief is available to boost the returns to wealthy investors who can afford to take out a stakeholder on behalf of their non-working wives, children and grandchildren – and would have an immed-iate effect.


Skipton announce new head of insurance

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Abbey launch stakeholder on-line

Abbey National is launching a fully automated on-line facility to enable employers to choose stakeholder pensions for their employees on the internet. Abbey say the move comes as a result of changes in pensions legislation which requires employers with five or more staff to offer pension provisions to employees from next October. Abbey&#39s stakeholder sales […]

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Cavendish online deals will give commission to charity

Cavendish Financial Management is launching an online financial products service that reinvests commission back into the policy or donates it to charity.Customers buying a policy through the website will pay a flat fee of £25 to cover the administration of each application.The service is only accessible online but transactions have to be processed and completed […]


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