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Personal finance

Disclosure Rules Shake Up Life Insurance Industry

Strategic Insights

— 1 min read

The UK life insurance industry is bracing itself for significant changes in consumer response to new disclosure rules, which require full transparency on commission payments to salesmen and advisers. Independent actuary AKG predicts a 30% drop in commissions this year as buyers become more informed. The "key features" document now discloses all costs, including commission, monthly service charges, and annual management fees.

Key Takeaways:

  • The new disclosure rules will show consumers the full extent of commission payments, monthly service charges, and annual management fees.
  • Independent actuary AKG predicts a 30% drop in commissions this year as consumers become more informed.
  • The "key features" document must now disclose all costs, including commission, monthly service charges, and annual management fees.
  • The new system allows consumers to compare different pension providers more easily, with up to 25% of investment growth lost to charges.
  • Life companies must illustrate how a gross investment growth rate of 9% will be affected by charges.
  • The new regime does not highlight differing investment performances of life companies, but information is available from independent sources.
  • Actuary Bacon & Woodrow warns that unit-linked pension funds may hide costs of dealing commissions, stamp duty, and other expenses.

Statistics:

  • The new disclosure rules require commission payments, monthly service charges, and annual management fees to be disclosed in the "key features" document.
  • Independent actuary AKG predicts a 30% drop in commissions this year.
  • Up to 25% of investment growth is lost to charges in some pension providers.
  • The new system allows consumers to compare different pension providers, with up to 35% of maturing investment going to charges in some providers.
  • The net growth rate after charges is brought down to 7.9% at Equitable Life, 7.7% at Guardian, 7.2 at Pearl, and 7.1% at Prudential.

Sources:

  • "Key features" document, Life Insurance Industry, [no date]
  • AKG, Independent Actuary, [no date]
  • Bacon & Woodrow, Actuary, [no date]
  • Life companies' websites, Prudential, Pearl, Equitable Life, Guardian, [no date]

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