L&G Life & Critical Illness cover from Nationwide - NOT On Your Side

Nathan_J

For Life Insurance and for Critical Illness Insurance, Nationwide sells policies provided by Legal & General. L&G is extremely competitive in this market, and it regularly appears in the ‘best buy’ tables. It would therefore be reasonable to assume that when you buy an L&G policy through Nationwide, you will be getting a good deal.

However, when you buy an L&G policy through Nationwide, the monthly premiums are, on average, some 27% higher than the identical policy purchased through an IFA, insurance broker or direct from Legal & General. This makes an L&G policy bought through Nationwide one of the most expensive in the entire marketplace.

But L&G policies purchased through Nationwide not only have higher premiums, they also pay vastly more commission than is paid on a standard L&G policy.

A recent example is a non-smoking couple, a male aged 32 and a female aged 28. They needed reducing Life & Critical Illness Cover of £158,000 over a term of 24 years.

The standard L&G premium was £47.51 per month.

Through Nationwide, for the exact same policy, the premium was £60.38 per month.

The commission payable to Nationwide was £2,340, which is a lot more than double the amount a typical IFA firm would get.

BUT READ ON – IT GETS WORSE (AND THIS IS WHAT REALLY ANNOYS ME)

Term assurance policies pay intermediaries a generous rate of commission to cover the cost of ‘advising and arranging’ the policy. Advising & arranging would generally include assessing the customer’s needs and then providing specific advice on the amount and type of cover required, and what type of trust (if any) should be used. It would also cover the cost of confirming the advice to the client, usually in a written report which would explain why the recommended policy is suitable for the client’s particular personal circumstances. The commission also covers the cost of helping the client with the proposal form, submitting it to the insurer, chasing GP’s etc and ensuring that the application proceeds to a satisfactory conclusion.

But with Nationwide, it doesn’t work like that.

Nationwide’s leaflet entitled ‘About our Life Insurance Services’ states as follows:

“You will not receive advice or a recommendation from us. We may ask some questions to narrow down the selection of products that we will provide details on. You will then need to make your own choice about how to proceed. You alone are responsible for deciding whether any product you choose to buy is suitable for your needs.”

Yet the Key Features quotation from L&G has a section entitled, ‘How much will the advice cost?’ beneath which the £2,340 (or whatever) of commission payable to Nationwide is disclosed.

So Nationwide charges huge amounts for advice, but then ducks out of providing any advice at all.

Consumers who purchase life or critical illness cover without advice have very limited recourse under the Financial Ombudsman Service (FOS) if things go wrong and the policy turns out to be unsuitable. So on top of charging huge amounts for non-existent advice, Nationwide denies its customers the benefit of the FOS safety net.

I think this is appalling. Is it just me?

I am an Independent Financial Adviser. My posts on this forum are for information purposes only, and nothing I say should be construed as financial advice. Different people have different circumstances and needs, and what is right for one person may be wrong for another. If a topic under discussion is of interest, you should seek advice from an Independent Financial Adviser who can advise you once he or she is fully aware of your own personal situation.

dunstonh

I think this is appalling. Is it just me?

All the policies sold via banks and salesforces are more expensive than the IFA version. It doesnt matter if it if life assurance or another product. Or if they use a third party brand or their own name.

Nathan_J

dunstonh wrote: »

All the policies sold via banks and salesforces are more expensive than the IFA version. It doesnt matter if it if life assurance or another product. Or if they use a third party brand or their own name.

I quite agree, dunstonh. However, what irks me particularly in the case of Nationwide is:

They are selling a well-known market-leading product which is generally excellent value for money. People will (quite reasonably) think they're getting the same VFM when they buy from Nationwide.

The premiums appear to be loaded mainly so that Nationwide can receive bags of commission.

The quote tells the purchaser that the commission (£ lots) pays for advice, which simply isn't true.

They avoid any liability to their customers by categorically stating that they don't give advice.

Nationwide sells these policies to its most vulnerable customers, such as first-time buyers, mortgage borrowers and those with young families to protect. Yet in many cases the excess premiums will amount to thousands of pounds over the term of the policy.

They are always banging on about how they can concentrate on looking after their members because they are a mutual with no shareholders, yet they act more like a bank than a bank!

Much respect to you BTW for the excellent work you do on this forum.

I am an Independent Financial Adviser. My posts on this forum are for information purposes only, and nothing I say should be construed as financial advice. Different people have different circumstances and needs, and what is right for one person may be wrong for another. If a topic under discussion is of interest, you should seek advice from an Independent Financial Adviser who can advise you once he or she is fully aware of your own personal situation.

ACG

Hi,

This is common knowledge to advisors, sometimes the cover isnt even identical to what you would get from an advisor, its a stripped down version.

The bit that is causing me a bit of an issue here however is the fact that you have a signature saying you are an advisor... If i was a normal person reading this thread i would be thinking this (despite being a pretty accurate post) could be seen as being biased.

Annisele

I'm in two minds about this.

On the one hand, if Tesco charges 27% more than Asda for a pint of milk, I'll probably buy from Asda. If I choose to buy from Tesco because it happened to be on my doorstep, then that's my choice - if I want to value convenience over price, I can. Tesco and Asda can look at each other's prices and at consumers' buying habits and adjust their pricing accordingly. I think that's all fair and dandy - and in principle I don't see why non-advised life assurance can't be sold on the same basis.

On the other hand, lots of consumers think they've received advice about life assurance even when "we don't give advice" is plastered all over everything. Nobody thinks Tesco has advised them to buy semi skimmed milk rather than skimmed, so my milk analogy falls down.

It's an issue that only affects relatively financially unsophisticated people (the rest will either go to an IFA or DIY), so on balance I'd come down on "Nationwide is not behaving well" - but I don't think it's a clear cut issue.

Edit after seeing ACG's post: I think this is an area where the adviser disclaimer is doing what it's meant to. Without the disclaimer, I could take the view that an adviser was unfairly posting something praising IFAs and dissing the banks/building societies. With the disclaimer, I could choose to read the whole thing as "IFA thinks consumers should go through IFAs rather than to the bank - shocker!" - so the disclaimer has alerted me to potential bias. (I'm not an adviser btw, though I do work in the financial services industry).

Nathan_J

ACG wrote: »

If i was a normal person reading this thread i would be thinking this (despite being a pretty accurate post) could be seen as being biased.

Biased - no. Intensely irritated by anything that whiffs of dodgy business practice - yes, definitely. And people deserve to know about it, hence the post.

For what it's worth I think that Nationwide is quite a good outfit on the whole. This L&G protection issue is the only big criticism I have.

I would hope that most advisers are also normal people. But I know what you mean:)

I am an Independent Financial Adviser. My posts on this forum are for information purposes only, and nothing I say should be construed as financial advice. Different people have different circumstances and needs, and what is right for one person may be wrong for another. If a topic under discussion is of interest, you should seek advice from an Independent Financial Adviser who can advise you once he or she is fully aware of your own personal situation.

kingstreet

What I find even more disturbing is that contracts are being "arranged" by intermediaries and they are not being "advised" to put those contracts in trust. Nathan did mention it briefly, but it should have greater prominence in any moan about protection selling in this country.

The implications for the buyers of these plans could be disastrous, leaving them walking out of bank and building society offices carrying a ticking time-bomb in their pretty folder.

Crying shame IMHO. :mad:

dunstonh

On the investment front, Nationwide's L&G investments are more expensive than the retail versions via IFAs. They are spotted by the (N) tag in the fund name.

Nathan_J

Thank you, dunstonh. I hadn't twigged that before.

I am an Independent Financial Adviser. My posts on this forum are for information purposes only, and nothing I say should be construed as financial advice. Different people have different circumstances and needs, and what is right for one person may be wrong for another. If a topic under discussion is of interest, you should seek advice from an Independent Financial Adviser who can advise you once he or she is fully aware of your own personal situation.