Latest Poll – Front Loaded Discounts

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Are you ok to advise your clients to consider taking out a new life insurance policy offering a front loaded premium discount?
  • No (62%)
  • It depends (26%)
  • Yes (11%)
  • Not sure (2%)

Our latest poll draws on our report last week, where research suggests that while new life risk policies with front loaded premium discounts can increase affordability in first-year premiums, they may be more costly to consumers over the medium-to-long term (see: Study Reveals Delayed Costs…).

The research indicates front loaded discount policies with stepped premiums have, on average, lower premiums in the first policy year, but higher premiums from the third policy year onward.

The findings demonstrate how, over five to 20 years, policies with front loaded discounts have significantly higher premium increases relative to the first policy year and PPS Mutual CEO, Michael Pillemer, contends that front loaded discounts are likely to increase lapses.

He says that the effect of sharp premium increases have psychologically on a client, and the increased likelihood the client will lapse as a result, should not be underestimated.

What do you think?  Would you advise your clients to consider taking out a new life insurance policy that offers front loaded discounts? There are definitely two sides to this debate and we’re interested to hear your views.

Tell us what you think and we’ll report back to you next week…



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1 COMMENT

  1. The poll doesn’t quite work as there are very different types of discounts. There is the 25% first year discount from BT which often means that year 2 premiums are 50% higher – that is a non-starter except with sophisticated clients. There are the Zurich, OnePath, MLC? and TAL discounts that are not excessive and require no input from the client and then there is the substantial AIA discount that comes with a fitness program. I initially hated the intrusiveness of the AIA discount but over time it is growing on me. All but the BT discount are fine by me and I am happy to do IP and level premium policies with BT as that ghastly discount doesn’t apply there.

    That ‘research’ is commissioned by an insurance company that doesn’t offer discounts.

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