Early indications suggest that 2018 was a good year for the long-term protection market, with reported new individual protection policy sales at the end of the third quarter up across most product lines.
This increase builds on the new sales in 2017 reported in Swiss Re’s Term & Health Watch 2018 report. The group risk market also saw good results in 2017, with just under 12.5m people now covered under employer-sponsored arrangements.
Across the whole market, we have seen renewed energy and enthusiasm to grow the sector and to adapt and improve customer propositions, in particular those that are service related.
I have the privilege of judging some of the industry awards. This became much tougher in 2018 for the very good reason that there has been a step up in the quality of entries and a really strong emphasis on the customer, with services and insurance protection coming together to create a far more compelling proposition.
Bright prospects
Looking to 2019, I remain very optimistic that the market has the potential to go from strength to strength. There is a real opportunity to support mortgagors better following the achievement of the Building Resilient Households Group, which secured an agreement with the Department for Work and Pensions that income protection benefits purchased with the intention to cover mortgage commitments will be disregarded when entitlement to universal credit is assessed.
With further confirmation that using the proceeds from a life or critical illness policy to repay a mortgage or other debt will not be treated as deliberate deprivation of assets, there can be little reason not to have a conversation with the customer about how the loan can be protected against the financial consequences of prolonged disability.
We are, though, increasingly becoming a nation of renters and a priority for 2019 has to be to secure a similar agreement regarding how universal credit and private insurance integrate such that private provision is not penalised.
AE contribution hike
Employers also face a further increase in pension auto-enrolment contributions from April 2019. This could mean that fewer are willing to expand benefit coverage. If so, there will need to be more emphasis on the value presented by intervention, rehabilitation and other services.
HM Revenue & Customs is consulting on the taxation of trusts. Here, the industry will continue to make the case for an exemption from entry, periodic and exit charges where a discretionary trust holds an Excepted Group Life Policy or a Relevant Life Policy. This will remove the risk of a tax charge which is random and complex and where the cost of administration exceeds the revenue generated by a factor of three or four.
Early 2019 will also see a technical paper on inheritance tax from the Office of Tax Simplification and the market will be keen to see its proposals.
We can also expect to see the government release its much-delayed green paper on funding social care. As the system struggles to cope with delivering the services our ageing society needs and deserves, there is an urgent need to open up the debate and to build a structure where the roles and responsibilities of the citizen, state and local authorities are clear.
There is unlikely to be any ‘silver bullet’ solution, but there really should be a role for long-term protection products and services.
The greater focus on the customer across the whole sector is welcome yet awareness remains low.
Working with the Single Financial Guidance Body will help to improve awareness, but the industry still needs to speak with a more consumer-friendly language. It would be great if 2019 is the year when that finally starts to happen.
Ron Wheatcroft is technical manager at Swiss Re Europe
