Big boost in level sales recorded before tax changes

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Insurance providers report that a significant amount of level cover was sold in the run up to the July 1 tax changes and there has since been a drop-off in sales.  

Wednesday, October 13th 2010, 11:20AM 1 Comment

by Jenha White

AMP general manager of marketing and distribution Blair Vernon says the amount of new level cover business written more than doubled on a ratio basis for AMP in the first half of 2010 compared to 2009 when it had already doubled from 2008.

While Vernon believes level sales were accelerated by some additional benefits given the nature of the tax changes, he does not think that was the only aspect driving sales.

 "Our adviser force says they have been having conversations with clients for some time getting people to realise that locking in a portion of their insurance on level makes for sensible management of their portfolio of risk products."

He says level is still not the predominant sales activity - there are still a large number of customers on yearly renewable term (YRT), but the conversation around level has become far more relevant with advisers looking to structure risk arrangements for their clients for long and enduring relationships.

Vernon says AMP advisers look for level to form part of an overall portfolio, with it being a baseline and then adding components of YRT for life stages of clients.

"It's like mortgages these days having a split of rates between floating and different fixed terms. Level presents an option for clients to better manage the mix of their insurance and that's how we see it unfolding and being of value to clients."

He says there are some headwinds against level however, with feedback from advisers suggesting that a lot of people understand the logic economically of taking a portion of their cover at level, but finding the up-front cost too much in these tough economic times.

He says sales slowed down immediately post July, but that was to be expected given the increase in activity in May and June.

ING managing director insurance Jeremy Nicoll says ING saw a marked increase in level sales especially in the last few weeks of June, where there was a large processing rush in the back office with the level to 65 cover being the most popular.

Asteron says there was an increase of around 14% in level premium sales for the second quarter of the year with most customers maintaining a split between level and YRT cover.

Asteron says this is generally because the customer wishes to be able to afford a certain amount of cover when they're older but will not need the full amount they currently require due to debt reducing.

Fidelity Life corporate marketing manager Peter Mensah says significantly more level  was sold in the run up to tax changes but it is difficult to measure type because clients can choose their own term with Fidelity.

Sovereign general manager of marketing and product David Drillien says information around the amount of level and YRT sold up to the July tax changes is "commercially sensitive and not something we are prepared to share".

Yet, he says Sovereign did see an increase in level sales before July.

"However, there were many factors aside from tax at play including the degree of promotion of level products and the negative publicity around recommending level when it wasn't appropriate."

AXA general manager of marketing and financial protection Mark Ennis says there was a big spike in sales coming up to May and June with the mix of sales being comparable.

He says since then sales have come back to more consistent ambient flows.

"We didn't come out with big announcements about converting to level, we just have a generic rule that advisers have to think about what's best for the customer," he says.

Jenha is a TPL staff reporter. jenha@tarawera.co.nz

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