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Whole of life is not at fault, just the way it is sold

The new year has started but it seems that nothing changes. The first edition of Money Marketing of 2005 had an article on whole-of-life plans, followed by a letter in the next edition from the inimitable Terence O’Halloran, who went a little over the top. I would make the following points.

I have never yet had a client who has told me exactly when he or she is going to die, which makes arranging term life cover a little difficult.

In the main I recommend these plans on a standard basis, never on minimum cover and very occasionally on maximum cover, making it absolutely plain to the client that there is a review after 10 years. This latter has a place when the term cannot be clearly defined and in such cases it may occasionally be suitable as one never knows the state of health of clients in the future and cover at any price may be preferable to not being able to obtain cover at all.

Whole of life can be a useful product for business protection. An indexation option is still not universal for term plans. When a director or shareholder leaves, the whole-of-life policy can be assigned to them without money or money’s worth and can be used for inheritance tax mitigation – perhaps one of the most useful aspects of whole-of-life insurance.

As is so often the case, it is not the product that is at fault but perhaps the way it is sold. A Ferrari is a terrific car but not necessarily appropriate in the hands of a testosteronecharged 18-year-old.

Like so many other products, I would venture to suggest that it is the big outfits which are the guilty parties. They are mainly product pushers looking to enhance their cashflow – rather than concentrate on solid long-term profitability – to attract potential shareholders and investors.

The life offices are often also to blame. Skandia, for example, has always adopted the practice of adding the indexed increments at maximum cover, notwithstanding that the original policy was written on standard cover. It was extremely hard in the early days to discover this poor practice. Reviews were revealing and, once this became apparent, I for one stopped placing this type of business with it.

Unfortunately, in the modern world, the providers have marketing departments whose aim in life is to shovel products and wind up IFAs, commonly to the detriment of the user.

Indeed, how many life offices utilise the phrase: “We can help you with your business.”? Anybody falling for this blandishment will probably need to dust off their PI policy immediately.

Although I am fairly sure that the FSA is not entirely wrong about some of the sales of these products and others, I am equally sure that it is not entirely right.

Of course, the Financial Ombudsman Service will always find complaints increasing when there is so much publicity concerning compensation. We have come to the stage where we have to mention compensation almost as much or even more than the attributes of the product itself.

Efforts to control the product by the regulator seem solely confined to cost rather than features, which again is self-defeating. These so-called scandals that are identified by the regulator are then taken up by the press, which on occasion puts sensationalism before accuracy.

All this seems to mitigate against the FSA’s own prime objective of restoring confidence in financial services.

As long as the current system prevails, I sincerely believe that this restored confidence will remain extremely elusive.

I am sure that I, along with many other readers, fervently hope that 2005 will see some changes for the better in all aspects of the industry but particularly from Canary Wharf, where perhaps the L&G saga may have done some good.

Harry Katz Stanmore,Middlesex


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Life cover for life

Jennifer Gilchrist Proposition Lead – Design, Royal London When someone mentions whole of life plans, most people will think of a niche product that serves as an inheritance tax planning tool for high-net-worth clients. And it’s really not surprising they’ve been pigeonholed in that way because before the arrival of RDR in 2013, that’s more […]


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