This may take some time but as regular followers of this type of letter will find, once I spot something that smells, I do not like to rest until it has gone.
When I first came into the profession (and I suggest you all get used to that word), there were two types of insurance – term and whole life. Everything else was a derivative.
Endowment was a reducing term with a savings scheme attached or a level term with a savings scheme. Reducing term did just that, family income benefit was a term that paid out in instalments and a whole of life did not need an explanation other than with or without profits.
Actually, a without profit whole of life did need a slight explanation as it had a small profit element guaranteed within the premiums that you paid in as against the sum insured you got out.
Oh happy days. We knew what we were selling and why. A client who wanted a “short term” cover got a short-term policy or a maximum cover whole life, (whoops, where did that one come from?).
A client that did not know how long they wanted the cover for but did know they wanted cheap cover now and would be prepared to pay more for it in the future did have one option favoured by thousands of financial advisers.
Yes, ladies and gentlemen, I present to you the convertible term policy – a simple term insurance that provides a set level of premium now with a set level of cover but, and note this, Norwich Union protection managers, with the irrevocable right that at any time prior to the maturity of the policy, my client could switch to an endowment, a whole of life or a further term policy which had to cease at an age probably in the 80s.
What that gave advisers was the opportunity to provide our clients with high life cover now and the option to convert to another type of cover later.
Then along comes some prat in the PIA who, not knowing his insurance from his elbow, decided that convertible term was to be a regulated product because it could, in the future, become one. Millions of people have been missold term insurance because of this legislative buffoon.
But back to NU, which last August followed another great example of changing the definitions of certain words, Equitable, with the word “guaranteed” and now Norwich with the word “convertible”.
When is a convertible term not a convertible term? When it does not have any-thing to convert to.
NU has deleted the option to convert to an endowment or a whole of life, leaving the client with the option only of extending the policy to a further term insurance.
Where I come from, that used to be called a renewable term or an extendible term or a rolling term but it was not called a convertible term.
Under the Trades Description Act, I think NU could have their knuckles rapped for trading on our blind trust that if a policy carries a name that we have trusted for years, it will be the same product inside that name.
Apparently, we were told by a letter/circular in August (the month when probably 60-70 per cent of IFAs go away) that they had cut out the option to convert to a whole of life.
That left NU's policy with the option to convert to a term. Convert to term? It is a term.It is an extendible term. No ifs, no buts, that is what it is.
Look up the definition of the word converted and you will find “that which can be converted”, “transmutable” or “transformable”. This one does not change into diddly squat.
Here's the deal, NU. Put back the option or change the name because what you have ripped us off with is a term policy which converts to a term policy. I would hate to discover it was a pricing thing such as taking a higher premium for no reason but I am sure the managing director will take it upon himself to allay my suspicions. After all, why should we now trust the words of the product managers or even the head of protection?
John Joseph Financial Services, London