Advisers have crticised Barclay’s new ‘simplified’ fixed-term life insurance product, highlighting key shortcomings compared to other basic products and warning there are several areas where the product lags behind traditional life cover.
At the start of this week (4 August) Barclays launched a fixed-term life insurance product underwritten by Aviva that claims to be the first to receive the ‘simple’ kitemark originally defined in the Sergeant Review by the British Standards Institution.
The product is available without advice. Applicants need to how long they would like the cover to last, from one to 51 years, and the amount of cover they would like up to £500,000.
After the customer has completed lifestyle questions, around 80 per cent will receive an ‘automatic accept’ decision with the remaining 20 per cent needing additional underwriting, which in some cases may require additional information or a doctor’s report.
It does not include features the Sergeant Review considered complex, such as decreasing term and cover for joint applicants.
Premiums start at £6 per month and stay the same throughout the policy, but while the product provides a lump sum on death it does not include terminal illness cover.
A spokesman for Barclays confirmed that this element was not included in the ‘simple’ criteria defined at an industry level and therefore it is not in the policy.
Speaking to FTAdviser, Alan Lakey, Highclere Financial Services senior partner, told FTAdviser that the Sergeant Review, has proved to be a “monumental waste of time and resource”, and that the simplified tag is just a marketing ploy.
He said: “My understanding is that it is an existing plan with options such as waiver of premium removed and with guaranteed insurability options and terminal illness, both of which are normally included automatically, also being removed.
“Any person capable of cogent thought would opt for a less simple product that contained some important bells and whistles rather then save 1 per cent on the premium and buy a second rate product.”
Emma Thomson, life office relationship director at LifeSearch, said: “Whilst it’s good that Barclays have chosen to improve their focus on protection, it is perhaps a shame that important benefits such as terminal illness benefit are not included under the simple products regime.
“Rather than being ‘bells and whistles’ that complicate plans, these features often provide genuine customer benefits and without them the product becomes inferior in comparison with traditional life cover.
“Products that include terminal illness benefit are still very simple and there is some concern that customers could unwittingly miss out. However, at the same this represents a good opportunity for advisers to add value as the products they can offer will be superior.”
Roy McLoughlin, independent financial adviser at Master Adviser, said that many people struggle to get access to financial advice, so it’s better to have some cover than no cover.
He said: “I think simple products have their place, what worries me is if people think it’s all they need, we need to get a message within these simple products that they’re a solution, but not the only solution.
“There’s no waiver in there for example, which is something any decent IFA would include every single time. The terminal illness cover thing can be hugely beneficial for people in that situation as well.”
