The Actuarial Profession : making financial sense of the future

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The Actuarial Profession making financial sense
of the future

• The 3rd Younger Members Convention
• 29 30 November 2004
• Chesford Grange Hotel Kenilworth

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SANDLER REVIEW

• REVELATION OR REVOLUTION?
  

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Coming up..

• 1. When did it begin?
• 2. What were the issues raised?
• 3. Solutions?
• 4. Where will we go next?

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The Sandler Review

• Announced by the government 18 June 2001
• REMIT
• To identify the competitive forces and
  incentives that drive the industries concerned,
  in particular in relation to their approaches to
  investment, and where necessary, to suggest
  policy responses to ensure that consumers are
  well served

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Considerations

• Product Designs
• Availability Distribution in the market
• Remuneration
• Value for money
• The broad findings

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The 5 Cs

• COMPLEXITY
• CONFUSION
• CHOICES
• COSTS
• COMMUNICATION

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Complexity in..

• Product Design
• Nil Reduced Allocation Periods
• Surrender Penalties
• Bonuses
• Market Value Adjustment
• Unit charges etc etc..

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Complexity in..

• Taxation
• Examples
• Qualifying or non-qualifying plans
• Withdrawal rules
• Incentives
• Different treatments of similar products

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Confusion around

• Differing terminology
• Eg Serious illness Critical illness
• Advice received
• Own product ?
• All products ?
• Selected range?

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Choices to make

• Do I need
• waiver of premium benefit
• increasing cover option
• critical illness rider
• Which fund is best for me?

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Costs incurred..

• How much am I paying for advice?
• Where are my initial premiums going?
• Is my provider cost efficient?
• Are there implications for my return?

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Communication

• Do I understand the literature?
• What is this illustration?
• What will you tell me in future?
• Are you being open honest?

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Public Impact

• Declining consumer confidence
• manifests itself in..
• Inadequate savings
• Mis-selling scandals arising .
• Personal pensions
• Endowments

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The future

• Simplified charging structures
• Standardised wording
• Limit on charges
• Accessible to individuals of low income
• No need for advice?

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The future of charging

• PHILOSOPHY --- Keep it simple

No more bid-offer
spread End of
surrender penalties
End of initial set up fees
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Future Charges

• Examples already appearing.
• Stakeholder Pensions
• Maximum annual charge 1 p.a
• Child Trust Fund
• Maximum annual charge 1.5p.a

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Advice

• More products available requiring no advice
• Decision trees for own use
• Improved clarity of status

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Communication

• New disclosure requirements
• Graphical representations?
• Single generic example?
• Less is more?
• Plain English?
• Standardisation?

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Standardisation Plain English

• Definition Heart Attack
• the death of a portion of the heart muscle as a
  result of inadequate blood supply as evidenced by
  an episode of typical chest pain, new
  electrocardiograph changes and by the elevation
  of cardiac enzymes. The evidence must be
  consistent with the diagnosis of heart attack

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A delicate balance
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What it means for the Industry

• Challenges !!!
• - keep costs low
• - be clear to all customers
• - Inspire confidence
• - Avoid future scandal

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• Thank-you for choosing this session.
• QUESTIONS/COMMENTS