Mutual starts shake-up in failing sector of the life insurance market
- Royal London addresses failings in the ‘Over 50s’ protection market - with new offering to help the many with few savings who are facing ‘funeral poverty’.
- New research highlights 59% of UK adults aged over 50 don’t know how they will pay for their funeral, and 64% underestimate or have no idea of the actual cost.
New research conducted on behalf of Royal London reveals over half (59%) of UK adults aged over 50 have no plans in place to cover the cost of their funeral, yet only 7% are worried about how their family will pay for it.
The study by Censuswide Research, among the over 50s, also found that the majority (64%) underestimate the cost of their funeral; and four in ten people over the age of 50 (43%) have not thought about their arrangements at all.
The new findings come as Royal London - the UK’s largest mutual life and pensions company with 5.3m customers and half a million members – begins a new drive to shake-up the ‘over 50s’ life insurance market.
While many* people over 50 could expect to cover the cost of a funeral and leave a modest inheritance, there is a large, growing minority with no means to pay for essential end-of-life costs. For example, Royal London’s research found that over a third (39%) of people aged over 70 are not saving any money to cover the cost of a funeral. An insurance plan provides an immediate and low-cost solution for this group, but one which has typically provided poor returns in the past.
Royal London - a mutual which began in the 1860s, by helping people to save to avoid the stigma of a paupers grave - wants to transform this market-space - which it says offers appalling value for money. Its new Over 50s Life Cover will tackle serious market failings head-on, and offer best overall value in the market.
A different kind of cover
For the first time, customers over the age of 50 can buy life cover with confidence, knowing that even if their circumstances change it will be both flexible and fair. The following features will be exclusive to Royal London customers:
- Protected Payout – If a customer has to stop paying premiums altogether, provided the policy has been going for at least half the term, Royal London will pay out at least half of the cash sum on death.
- Flexibility – if times get hard, monthly premiums can be reduced at any time to £5 a month. Or customers can choose to increase their cover if they need to, with a new policy from just £1 a month more.
The cover also includes the following features:
- Guaranteed Acceptance to all 50-75 year old UK residents, with no health or lifestyle questions.
- Guaranteed cash sum – After the policy has been in place for a year, Royal London will pay a cash sum in the event of death.
- Funeral Benefit Option – If a customer chooses this option, Dignity Funerals Limited will pay a £300 contribution towards the customer’s funeral with them.
Terms and conditions apply - full details available upon request.
Commenting on the launch, Jerry Toher, CEO of Consumer at Royal London Group said
“Currently, the market for ‘Over 50s’ insurance plans does not serve customers well. In practice policies can be very inflexible and unfair. Although life insurance remains a very popular product – especially for people with low levels of lifetime savings, who want to leave a legacy after their death –it offers poor value for money for many customers. Sometimes customers and their loved ones are left with nothing despite paying out over the years, which is appalling. We are aiming to transform the market with a product that is fair, flexible and good value.
“We believe our offering is a real game-changer - better for customers’ pockets and peace of mind. Over recent months we’ve spoken to many customers, to get their input. They were very clear, and said they need flexibility and value for money. For example, premiums are returned if a customer dies in the first year, and customers can receive a cash sum on death even if they stop making payments.”
Commenting on Royal London’s new offering, James Daley, Managing Director of the consumer group Fairer Finance said:
“A shake-up in the over 50s protection market is long overdue. Royal London’s new offering addresses some of the worst trends in this market – and crucially it will ensure people can still get a cash sum even if they have to stop paying into their plan after 10 or 20 years. But providing a fairer product only deals with half the problem. The real scandal in the over 50s protection market has been the way products are sold: using ‘trusted’ celebrities and free ‘gifts’ to convert sales, without properly highlighting the downsides and risks of these products.
“It’s crucial for Royal London to prove its commitment to its customers by setting a new bar for transparency and honesty in the way that it markets these products. Over 50s plans are a valuable lifeline for thousands of people, but they’re also the wrong choice for many. So it’s vital that customers are helped to understand their options, and only sign up if they’re sure it makes sense for them. I hope Royal London is successful, and its arrival in this market exerts much needed pressure on existing players to up their game.”
For further information please contact:
Nancy Baynes at Royal London 020 7 506 6585 or firstname.lastname@example.org
Betsy Haglage at Fleishman Hillard 0207 395 7126 or email@example.com
Notes to Editors:
- The survey for Royal London (by Censuswide in May 2014) found:
- Over half (59%) of UK adults aged over 50 have no arrangements or plans in place to cover the cost of their funeral - among this group: 7% are worried about how their family will pay; and 4% expect the government to handle the cost.
- The majority (64%) of UK adults aged over 50 admitted they don’t know or underestimated the cost of their funeral. While four in ten people over the age of 50 (43%) have not thought about their arrangements at all.
- Over a third (39%) of people aged over 70 said they are not saving any money to cover the cost of a funeral.
- A significant number of people aged over 50 in the North East (13%) and South West (15%) have not made any plans, and say they are worried about how their families will pay for their funeral.
- Worryingly, over half (53%) of respondents from Northern Ireland had not thought of funeral provision or made any arrangements. While around a third (28%) of respondents in the North East had made no funeral provision or plans. This compares to 36% who have not in Wales.
- Across the UK, 8% of people aged over 50 say they have made arrangements with a funeral provider – but this figure drops very low in some regions: to 3% in the South West (lowest in UK); 4% in the East of England; and 5% in Northern Ireland.
- Although just over half (55%) of people aged over 70 have made arrangements to cover costs (for example: a life policy, savings, arrangements with family or a funeral provider), but this figure drops to 42% among people aged 60 to 69, and down to 27% among people aged 50 to 59.
- A significant number of people in the South West (6%) expect the government to pay for their funeral; while in London and the East of England it's 5%. Only 1% of respondents in the South East expected government to pay.
- When compared to other UK regions, people living in the following areas own the fewest 'Over 50s' life policies: Midlands (9%), South East (7%) and South West (6%). On a national scale, those living in the North East have purchased the most (13%).
Variations across the UK:
The survey was conducted by Censuswide, with 1,010 UK adults aged over 50, between 24th and 26th May 2014. Censuswide abide by and employ members of the Market Research Society which is based on the ESOMAR principles.
- How Protected Payout works:
- In Feb 2014 Royal London conducted quantitative research with almost 1,000 people (938 online interviews) via Research Now's UK panel. The majority (75%) of respondents agreed that a policy which includes Protected Payout is a fairer type of policy, i.e. fairer than other similar plans where in the same circumstances after many years they would lose everything. (Interviewees were representative of the core customer group for ‘Over 50s’ life insurance plans: adults aged 55-65 in socio class C2, D & E, who had savings of £5k or less, who had taken out a policy in the past 18 months, and were still in contact with their children).
- Useful industry data:
- *According to Office of National Statistics (ONS) data: 43% of UK adults aged 45-64 live in households with a total wealth >£500k; meanwhile, 12% of adults aged 45-64 are living in households with total wealth <£50k (source: www.ons.gov.uk/ons/dcp171776_313608.pdf)
- The average cost of a funeral in the UK is £3,594. It ranges from £5,297 on average in London to £3,181 in Wales; average cost in UK for a cremation is £3,231; average cost in the UK for a burial is £3,846. (All data sourced from Matter Communications – commissioned by Dignity).
- According to the Association of British Insurers: In 2012, of the 26m households in the UK, 5.3m had whole of life assurance (Source: ABI’s Key Insurance Facts 2013).
- According to the Department of Work and Pensions: in 2012/13 there were 66,000 claims for a Social Fund funeral payment. A successful claimant will receive £1,300 on average (source: DWP’s Report on the Social Fund).
- Royal London has range of simple online guides online, to help people take control and manage their finances. This includes a straight-forward guide explaining different types of insurance: www.royallondon.com/financialguidance/guides.
- Full terms and conditions for Royal London’s Over 50s Life Cover are available on request.
If ‘Jane’ takes out cover when she is 55, so her premium payment term is 30 years (until she’s 85). But at the age of 70 she finds that she can no longer afford to keep paying monthly premiums. By then she has been paying for 15 years – that’s half her premium payment term. At this point, Protected Payout applies so when Jane eventually dies we will still pay out half the full cash sum.
Jane’s cash sum with £20 monthly
Jane’s Protected Payout if she stops paying after 15 years (50% of premium payment term)
About Royal London:
Royal London is the largest mutual life and pensions company in the UK with Group funds under management of £73.6 billion. Group businesses serve around 5.3 million customers and employ 2,880 people.(Figures quoted are as at 31 December 2013). The Group is moving to operate all of its UK life, pension and investment business under a new version of the Royal London brand. Royal London Asset Management is now under the new master-brand, and the Scottish Life, Scottish Provident and Bright Grey brands will migrate by the end of 2015.