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Seize the A-Day

More people than ever before will be reviewing their protection in April 2006.

The protection market is about to be given a real opportunity to grab the nation’s attention. On A-Day next year, there will be any number of journalists telling their listeners, viewers and readers to think about the products we sell. What a tremendous and rare opportunity the offering of tax relief on life insurance should be.

All the providers I know are thinking very hard as to how the market will look on April 6 and beyond. Those thinking of entering the market have a unique clean-sheet opportunity. Those with substantial books need to devise a strategy to hold on to them while gaining as many new sales as they can fairly.

The opportunity is obvious. There will be more people reviewing their protection in the middle of next year than ever before and, if properly advised, people tend to spend more on things when they are tax-deductible. What a great chance to grow a market and get people better protected. Any opportunity carries a consequent threat and it is clear that a great many customers will be best advised to change their present life policy for a tax-efficient policy.

The best way of avoiding good consumer advice leading to a “churn” of one’s existing policies to those of predatory newcomers must be to market to one’s existing customers a simpler switching mechanism that allows the premiums and risk to remain with you because it is easier than moving. Provided this is competitively priced, it will satisfy most consumers, who want to be tax-efficient, to save money and keep life easy.

I have had it confirmed that this is legally and technically possible for providers to achieve. Advisers should be provided with the tools to facilitate this with their customers wherever they deem it appropriate. Provided the terms and size of the risk are not changing, the end-result for the provider is that the premium to you need only go up slightly while the premium to them falls. A perfect result.

I do not expect good advisers to deem price the major issue here. Simplicity of achieving a tax saving, quality of service and certainty of cover seem to me to be the primary issues.

At the provider-reinsurer treaty level, it is, I am told, a lot harder. Existing books have multiple treaties and new business often comes under yet further treaties. Each of these needs to be renegotiated to allow tax-deductible premiums. But bearing in mind that all parties want the premium flows to continue, it must be possible, even in the brief time that the Treasury has allowed us, to renegotiate these. Even if the job is only partially done, those policyholders governed by the renegotiated treaties can be made the offer, thus reducing the scale of the risk proportionately.

This is a real test of providers’ and reinsurers’ will to treat customers fairly and fight for business using advice and process quality rather than price. It also gives all a real chance to back advice and thus increase the size, quality and persistency of their book of risk. Advisers have, in truth, little confidence that providers will achieve this and master the IT issues in time but we live in hope.

In the end, advisers will do what is best for each customer. It is up to the providers to make that what they each want it to be.

By the way, can someone come up with a better name than pension term assurance. It has nothing really to do with pensions.

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