Far Too Many People Are Surrendering Their Life and Pension Policies Prematurely - Further Evidence of Mis-Selling

By Cicutti, Nic | The Independent (London, England), October 24, 1998 | Go to article overview
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Far Too Many People Are Surrendering Their Life and Pension Policies Prematurely - Further Evidence of Mis-Selling


Cicutti, Nic, The Independent (London, England)


WHAT ON earth is going in with life insurers? Two events this week lead me to ask this question.

The first is the publication of a regular survey by the Personal Investment Authority (PIA), the financial watchdog, of so-called "persistency rates". Basically, these measure the proportion of policyholders who lapse their life insurance, endowment and personal pension policies within a given space of time.

The figures are shocking. What they show is that on average, only 60 per cent of regular premium pensions sold by insurance salespeople are kept going for more than four years. For some companies the figures are even less. Black Horse Life, owned by Lloyds Bank, manages just 55 per cent. Cornhill has a persistency rate of 53 per cent. Legal & General's salespeople barely manage to get 56 per cent of their policies to stick. The position with endowments is hardly better. Barely three quarters of people keep their endowments going, on average, for more than four years. And this conceals far worse figures: a third of Abbey Life's policies, a company also owned by Lloyds, are lapsed. Lincoln is even worse, at 59.4 per cent. If people surrender their policies after so short a time, it means mis- selling is still rife within the industry. Moreover, in many cases the amount policyholders will get back from their investment after four years will be negligible. This is because most of these policies are deliberately structured so that all the charges are up- front. The third issue concerns how advice is given. These figures show clearly that salespeople give worse advice than independent financial advisers (IFAs), though the difference is not staggering.

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