Aviva overhauls life insurance after HMRC talks

Aviva overhauls life insurance after HMRC talks

Aviva has made changes to its relevant life insurance proposition after working with HM Revenue & Customs following concerns from advisers.

Mark Cracknell, head of protection distribution, said he understood that some advisers were uncertain about the product since a number of other providers had expressed doubts about whether the product complied with tax rules.

Following meetings with HMRC, Aviva decided to "evolve the structure of the product", removing the critical illness element and introducing an employee significant illness element.

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Unlike the critical illness cover, the employee significant illness element provides cover in the event of a condition which leads to retirement of the life covered.

When asked whether the changes meant Aviva had been wrong about whether the product was within the rules, Mr Cracknell said: "We are not saying anyone is right or wrong in this and we have stood by the product we launched in 2016."

He added that the fact HMRC had agreed to allow existing relevant life policies to remain in force based on the terms and conditions under which the policy was issued was a sign that the product had not contravened any rules.

Aviva was the first provider in the market to launch a relevant life policy with critical illness cover but it has acknowledged that since this launch there has been "continued confusion" about the product.

Mr Cracknell said: "What we have been trying to do is work to get to a situation where the ambiguity over this product can be removed.

"We don't want to be in a situation where advisers have one product provider saying one thing and another saying another."

Mr Cracknell added that he expected other providers to make the most of the certainty that Aviva had now helped provide.

Alan Lakey, director of CIExpert, said: "The new plan does not compare with the individual plans offered by Aviva, which is due to the insistence that a retirement event is created. 

"Equally, it should not be compared in this way because it is a different beast entirely. This plan is aimed at employers who wish to protect their employees.

"Having additional retirement event cover alongside death cover makes for a more comprehensive plan and is bound to prove popular.

"Plaudits go to Aviva for not only widening the scope of the market but for also ensuring that existing plans are not subject to challenge."

HMRC declined to comment.