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‘Churning is killing profits for life offices’

Analyst Ned Cazalet says insurers spend too much money writing business which will promptly leave their books, meaning that they will make little or no profit.

He says the ease in which intermediaries recycle poli- cies to earn more commiss- ion is destroying life office balance sheets.

FSA data shows that almost half of all individual policies lapse within four years and 60 per cent of group pensions lapse within three years. Cazalet says commission clawbacks of three years on contracts that will not reach profitability for life offices for 10 years or more leave them open to switching by IFAs and many do this.

He criticises the way that insurers disclose sales figures, saying they focus on new business without showing busin- ess persistency rates.

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