Britain's First Network of Bancassurers Fails to Disrupt Life Assurance Market

The creation of Britain's first network of Bancassurers, led by Nationwide Life, aims to cut the cost of life assurance, pensions, and investments. However, an analysis by the Personal Investment Authority indicates that these new players have not managed to undercut existing competitors in the industry. The big four banks and top three building societies, including Abbey National, Halifax, and Barclays Bank, have also ventured into the insurance market, but their policies are often more expensive than those offered by traditional life companies.

Key Takeaways:

• Nationwide Life's launch completes the creation of Britain's first network of Bancassurers, with the aim of cutting costs for life assurance, pensions, and investments.
• However, the initial analysis by the Personal Investment Authority shows that these new players have failed to undercut existing competitors in the industry.
• The big four banks and top three building societies have also entered the insurance market, but their policies are often more expensive than those offered by traditional life companies.
• Norwich Union Direct service launched a discount motor and household policies, but its policies are more expensive than those offered by Equitable Life.
• Equitable Life charges Pounds 14.16 per month for Pounds 100,000 worth of 25-year-term life cover, while the Halifax charges Pounds 22.91.
• The Bancassurers are competitive for low-cost endowments, but they only offer unit-linked policies, which are higher risk and less transparent.
• Midland, Abbey National, and Halifax deduct high charges on their unit-linked policies, reducing the final annual return by up to 1.4%.
• Traditional life companies, such as Standard Life and Equitable Life, deduct lower charges on their with-profits contracts, making them a more attractive option for investors.
• The insurance market is highly competitive, with banks and building societies seeking to snap up a significant share of the market.

Statistics:

• Nationally, the cost of a 25-year-term life cover policy with the Halifax would be Pounds 4,000 over 25 years.
• Midland deducts charges of Pounds 1,360 over the first five years of a 25-year unit-linked policy with a Pounds 60 monthly premium.
• Abbey National charges Pounds 1,520 on its unit-linked endowment, reducing the final annual return by 1.4%.
• Standard Life deducts charges of Pounds 810 on its with-profits contract, making it a more attractive option for investors.

Sources:

• The Personal Investment Authority
• Norwich Union Direct
• Equitable Life
• Direct Line
• The Woolwich
• Standard Life
• Midland