Life InsuranceMar 23 2012

50 years of life assurance

Search sponsored by
ByDavid Severn

With profits and unit linked policies and bonds have formed the backbone of the products available to IFAs, as well as direct sales staff, over the past 50 years and have formed the major source of remuneration for many advisers.

More importantly life assurance has been the vehicle by which IFAs have met the investment and protection needs of millions of their clients, not to mention mortgage repayment vehicles and health insurance needs – although strictly speaking this latter comes under the heading of general insurance.

It is therefore no surprise that Money Management has always devoted substantial coverage to life products and their application over the past 50 years.

The launch of Money Management coincided with a major change in product design in the life industry.

Until the 1960s with profits offices had the industry sewn up. But the first unit linked contracts were soon to appear and the unit linked concept really took off when Sir Mark Weinberg founded Abbey Life Assurance in 1961.

The 1960s and 1970s were also a period of major change in other aspects of the financial sector, leading to significant pressure on offices to change.

Proprietaries, mutuals and demutulisations

Over 50 years the number of life offices has declined and there has been a shift in the legal status of many.

In 1962 Prudential and Legal & General were the biggest offices, both still around today but now challenged by giants such as Aviva. As commercial pressures mounted on mutual offices and exacting solvency requirements were imposed, an increasing number looked to demutualise or were taken over.

Becoming a public limited company meant that an office was able to access a much broader capital base. For ordinary policyholders there was the temptation of a windfall payment. The downside was that, whereas a mutual concerned itself with the interests of its members, on conversion it would be beholden to shareholders and their interests could conflict with those of policyholders.

The first significant mutual to change was Scottish Equitable, which was taken over by Aegon in 1994. Others held out for some years, Standard Life for example not converting until 2006. Some mutual offices were even allowed to keep their original names after demutualisation – Scottish Mutual, for example, became a limited company but continued to be called Scottish Mutual after it demutulised…

In terms of the total size of the life industry there were £6.7bn of assets under management in 1962, which has risen to £1,597bn in 2011. The number of policies in force in 1962 was around 14.2m and by last year it was 73.2m.

With profits