Listening to a back episode of the BBC’s Money Box programme, I came across a discussion on the merits or otherwise of the over 50s plans. The presenter Paul Lewis was reviewing the products with a representative from WHICH.
These products are based on the idea that, without any medical checks, over 50s can get a minimal ‘burial’ lump sum for a relatively small layout. So for, say £20 per month, it guarantees a lump sum of £3,000 upon the death of the policyholder. The products are generally marketed by older celebrities and are sold by many of the biggest Life and Pension providers in the UK.
On the programme, Richard Lloyd, Which’s Executive Director, slammed these plans by critiquing them as if they were standard savings products and not insurance products. He pointed out that if you lived for long enough, you would have paid out double what you paid into the product in the first place.
This is true but it is not a fair comparison and WHICH should know that. Richard Lloyd also stated that the plans would be worth a look if you had a serious medical condition. Does he not realise that if only the very ill buy these plans, then the cost of the plans will soar or they will be removed from the market altogether?
WHICH seem to be forgetting that insurance products are based on pooled risk and that most people who think about it are quite happy for it to be poor value. I myself have been delighted that the money I paid for fire insurance on my home over the last twenty-five years has been wasted because I never had a house fire to ‘recoup’ my investment. Similarly, I’m nearing the end of my mortgage and am hoping that all my mortgage protection insurance money will turn out to have been squandered, so that I get to finally live in a house that I completely own.
The notion of pooled risk will mean that these products are excellent value for those who die quickly, average value for those who die in the mid-range and very bad value for those who live a long time. Which value do you want?
I’m not saying that Over 50s plans are a good buy, but if any comparisons were to be made, they should have been made with term assurance or whole of life assurance products rather than with deposit accounts. Telling people that they would be better off putting their money into a Cash ISA or in a box is not true if the saver then dies within 12 months. The Over 50s plans provide a guaranteed lump sum on death, cash ISAs and cardboard boxes don’t.
We should remember what the protection industry is selling – peace of mind. The fact that the lucky ones who live to 90 will overpay is counterbalanced by the fact that they have lived to 90.
My point is that if experts are to go on publicly respected programmes and mislead the elderly into the nature of the products we sell in the industry, can we be surprised when ultimately the public don’t trust us. WHICH should be a bit more careful about how they present their research and avoid sensationalism, which seems designed more to promote their own brand than to protect the consumer.