New research from Sainsburys Finance has revealed that ex-smokers in the UK, which amount to about 3.3 million people, are losing out big savings when taking out life insurance premiums . It was estimated that that ex-smokers are paying out GBP316 million more in total than necessary, due to them forgetting to inform their insurer about having given up on their habit.
Sainsbury’s Finance said that people who have managed to give up their smoking could save up to 46 per cent on their life insurance cover . The findings from the report revealed that the average smoker’s life insurance premium is GBP209.75 per year, as compared to GBP111.88 for a non-smoker, meaning that you can save as much as GBP95 on annual life cover if you qualify as a non-smoker.
For people to be allowed to put themselves down as a non-smoker on life insurance forms, they must have given up smoking at least a year before, as well as avoiding the use of nicotine replacement products since then, otherwise insurers will still charge them more.
Andrew Gray, life insurance product manager at Sainsbury’s Finance, commented "A huge number of people have quit smoking over the past few years and the health benefits of not smoking are now very well-known, although the financial gains are often underestimated."
Wednesday, March 9, 2011
Life insurance sell off hits profits at AXA
A sharp fall in profits at insurance giant AXA has been blamed on its sale of its life insurance division, AXA Sun Life, to Friends Provident last September. The insurer, which employs about 1,000 staff in the UK, announced underlying earnings of GBP131 million for 2010, down from the GBP235 million reported the previous year.
The GBP2.75 billion AXA Sun Life sell off was part of a restructuring programme, which resulted in four specialist units, personal insurance, commercial insurance, healthcare and wealth management, in an attempt to focus on the demands of both consumers and intermediaries .
AXA has also stated that it expects further rises in premiums for personal insurance products over this year as the market worked towards restoring profitability.
Paul Evans, group chief executive for AXA UK and Ireland, commented "Our priority for 2011 is to focus on delivering great service and valued products to consumers and businesses in those markets where AXA can leverage real competitive advantage."
French-owned AXA said that the operating ratio in 2010 was disappointing, but that greater improvements would come during this year as premium increases applied across personal lines in 2010 took effect. However, they recently warned there would be possible redundancies at their Ipswich office due to the separation of its commercial and personal lines operations.
The GBP2.75 billion AXA Sun Life sell off was part of a restructuring programme, which resulted in four specialist units, personal insurance, commercial insurance, healthcare and wealth management, in an attempt to focus on the demands of both consumers and intermediaries .
AXA has also stated that it expects further rises in premiums for personal insurance products over this year as the market worked towards restoring profitability.
Paul Evans, group chief executive for AXA UK and Ireland, commented "Our priority for 2011 is to focus on delivering great service and valued products to consumers and businesses in those markets where AXA can leverage real competitive advantage."
French-owned AXA said that the operating ratio in 2010 was disappointing, but that greater improvements would come during this year as premium increases applied across personal lines in 2010 took effect. However, they recently warned there would be possible redundancies at their Ipswich office due to the separation of its commercial and personal lines operations.
Thursday, November 4, 2010
Should the lowest premium decide which life insurance cover you buy?
Financial planning is not complete without adequate life insurance, most of us would agree. And term insurance at that — particularly if you are earning and have dependents — for it is the most cost-effective option available in the market.
But even the cost of a term cover commensurate with your age and risk profile varies from company to company.
So, should you buy a cover from the company that charges you the least premium for the amount of cover you wish to take?
Experts suggest you look at a number of other factors and not the amount of premium alone.
The most important things to consider are the probability of the claim getting settled in the event of your death, and at the earliest, to avoid financial duress to the loved ones you leave behind. Imagine paying premium diligently for 20 years and then, after your death, the claim being disapproved for one reason or the other. You would also not like it if your family fails to get the sum assured say six months or even a year after your death, would you?.
These two considerations — assurance of the claim being settled and on time — are perhaps what have been driving people to prefer the Life Insurance Corporation (LIC) over the private players.
While such apprehensions may hold in a few cases, a generalisation would be far from accurate.
An analysis of the efficiency of claims settlement of various insurance companies based on the figures submitted by them to the Insurance Regulatory and Development Authority of India (Irda) should be in order.
For the sake of simplicity, we have selected six private life insurance companies and the LIC for comparison.
The private life insurers selected here charge the lowest premium for a term cover of Rs 1 crore, for a 30-year-old male, for 30 years. Note that the premium differs significantly across companies as the age and tenure changes. Hence, in case you want a cover for 20 years or for a lower value, it could just as well be that the cheapest cover is provided by some other insurance company.
Next, we compare their claim settlement ratio and turnaround time for settlement based on the data uploaded on their websites and submitted to Irda for the 2009-10 financial year. Turnaround time is the number of days it takes to settle a claim once all the documents have been submitted to the insurance company. For LIC, the latest such data available is for FY 2008-09, which has been taken.
Please also note that the claim settlement ratio and turnaround time for settlement mentioned in the table are cumulative for all the insurance plans offered by a company and not specific to term plans.
As can be seen, the claim settlement ratio of the cheapest term plan, offered by Aegon Religare, is a poor 48% and it also has the lowest turnaround of 46% within one month.
In comparison, LIC has the best claim settlement ratio of 95%, though its cost of cover is more than three times that of the other insurers.
ICICI Pru’s iProtect plan stands out as one of the cheapest term covers with a respectable settlement ratio of 90% and with 74% of the claims getting settled within one month.
Met Life’s Met Protect plan also compares favourably.
An analysis of the rejected claims reveals that most of them are for policies which are less than two years old. This may be a reason for the low claim settlement ratio of new companies such as Aegon Religare. Whether it improves in future will need watching.
To conclude then, even the private insurance companies have good claim settlement records, even when they are offering the cheapest term plan.
Such analysis should be done periodically to check the consistency and long-term trends before zeroing in on any plan.
Sunday, October 10, 2010
Financially Speaking: Life insurance: How much do you need?
No one likes to think about death. Unfortunately, it's going to happen to all of us one of these days.
Life insurance was created to help people protect the financial stability of their families in the event of their premature death. With so many insurance products available today, it's becoming more difficult to determine how much life insurance you need, and which type of insurance is appropriate.
Simple rules of thumb are often used to estimate someone's life insurance need. The income rule calculates your life insurance need at six to eight times your gross annual income. For example, if you earn $60,000 per year, this rule calculates your needed coverage at $360,000 to $480,000.
The income-plus-expense rule calculates your insurance need at five times your gross annual income plus the total of your outstanding debt, plus estimated final expenses and special funding needs such as college expenses. Using this rule, if your income is $60,000 and your combined debt plus funding need totals $150,000, you would need $450,000 of life insurance.
The income replacement method assumes you should purchase enough life insurance to replace the income you could potentially earn throughout your working career, considering future inflation, increases in your earning capacity, and the investment performance of the life insurance proceeds over time.
These rules are overly simplistic, in my opinion, because they fail to consider several important factors:
You may be able to reduce your life insurance need by some or all of the value of your existing investments, although you will need to consider the effect of income taxes and any limitations on the accessibility of those assets. For example, retirement plan assets that might be subject to early withdrawal penalties.
If you are married, have you considered your spouse's future earning capacity after your death? He or she might be able to earn enough to cover your debt payments. Conversely, the death of a parent might create a need to obtain professional household or child care services and that expense should be included in your calculation.
You might have already accumulated a vested pension benefit that is available to your survivors.
Liquidity is a consideration that is frequently overlooked. Although there is no federal estate tax in 2010, it will very likely resume after Dec. 31. The value of real estate or a closely held business could easily take the value of a decedent's estate above the federal or state exclusion. Life insurance can be a cost-effective vehicle to provide your estate with the cash needed to pay the tax and avoid a forced liquidation.
Even if estate taxation is not a problem, life insurance can be used to equalize bequests to your heirs. For example, if one of your two children works in a family business valued at $1 million, you could leave the business to one child and a $1 million life insurance policy to the other.
If there is no one who would be financially harmed by your death, you might not need any life insurance at all.
An experienced independent life insurance agent can help you determine the appropriate amount of life insurance you need and the type of policy to purchase. You should also obtain expert advice regarding ownership and beneficiary designations in order to avoid inadvertently creating a tax problem.
Life insurance was created to help people protect the financial stability of their families in the event of their premature death. With so many insurance products available today, it's becoming more difficult to determine how much life insurance you need, and which type of insurance is appropriate.
Simple rules of thumb are often used to estimate someone's life insurance need. The income rule calculates your life insurance need at six to eight times your gross annual income. For example, if you earn $60,000 per year, this rule calculates your needed coverage at $360,000 to $480,000.
The income-plus-expense rule calculates your insurance need at five times your gross annual income plus the total of your outstanding debt, plus estimated final expenses and special funding needs such as college expenses. Using this rule, if your income is $60,000 and your combined debt plus funding need totals $150,000, you would need $450,000 of life insurance.
The income replacement method assumes you should purchase enough life insurance to replace the income you could potentially earn throughout your working career, considering future inflation, increases in your earning capacity, and the investment performance of the life insurance proceeds over time.
These rules are overly simplistic, in my opinion, because they fail to consider several important factors:
You may be able to reduce your life insurance need by some or all of the value of your existing investments, although you will need to consider the effect of income taxes and any limitations on the accessibility of those assets. For example, retirement plan assets that might be subject to early withdrawal penalties.
If you are married, have you considered your spouse's future earning capacity after your death? He or she might be able to earn enough to cover your debt payments. Conversely, the death of a parent might create a need to obtain professional household or child care services and that expense should be included in your calculation.
You might have already accumulated a vested pension benefit that is available to your survivors.
Liquidity is a consideration that is frequently overlooked. Although there is no federal estate tax in 2010, it will very likely resume after Dec. 31. The value of real estate or a closely held business could easily take the value of a decedent's estate above the federal or state exclusion. Life insurance can be a cost-effective vehicle to provide your estate with the cash needed to pay the tax and avoid a forced liquidation.
Even if estate taxation is not a problem, life insurance can be used to equalize bequests to your heirs. For example, if one of your two children works in a family business valued at $1 million, you could leave the business to one child and a $1 million life insurance policy to the other.
If there is no one who would be financially harmed by your death, you might not need any life insurance at all.
An experienced independent life insurance agent can help you determine the appropriate amount of life insurance you need and the type of policy to purchase. You should also obtain expert advice regarding ownership and beneficiary designations in order to avoid inadvertently creating a tax problem.
Saturday, September 18, 2010
Life insurer Axa sold to Resolution
Life insurance consolidator Resolution Ltd has finalised its takeover of Axa UK Life. Resolution, which also bought up insurance provider Friends Provident last year, is based in the Channel Islands, and is paying up to GBP2.75 billion for the life insurance arm of Axa.
Denis Duverne, deputy chief executive of Axa, commented "This transaction is instrumental in our strategy of further optimising capital allocation within the group while focusing our operations on the higher margin and higher growth segments of the UK life and savings market ."
The acquisition of Axa UK Life by Resolution, which led to the suspension in trading of Resolution's ordinary shares from the London Stock Exchange, has been called a reverse takeover .
There have also been a few changes within the company due to the deal. Although Trevor Matthews will remain as chief executive officer of Friends Provident Holdings, David Hynam has been appointed as executive director of operations for Friends Provident Holdings, and Andy Parsons will become interim finance director. Both Hynam and Parsons previously worked at Axa.
Resolution provided a statement on the moves: "A new organisational structure is being implemented which will broaden the complement of top management in the business."
Denis Duverne, deputy chief executive of Axa, commented "This transaction is instrumental in our strategy of further optimising capital allocation within the group while focusing our operations on the higher margin and higher growth segments of the UK life and savings market ."
The acquisition of Axa UK Life by Resolution, which led to the suspension in trading of Resolution's ordinary shares from the London Stock Exchange, has been called a reverse takeover .
There have also been a few changes within the company due to the deal. Although Trevor Matthews will remain as chief executive officer of Friends Provident Holdings, David Hynam has been appointed as executive director of operations for Friends Provident Holdings, and Andy Parsons will become interim finance director. Both Hynam and Parsons previously worked at Axa.
Resolution provided a statement on the moves: "A new organisational structure is being implemented which will broaden the complement of top management in the business."
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