Joe Duffy Show on Whole of Life/Investment policies

[44brendan]

Wasn't the assumed return on endowments an average 6% over their lifespan? Very popular when first marketed in the 80's and mostly market on the basis that a 6% return was extremely conservative!!

 

[Duke of Marmalade]

Wasn't the assumed return on endowments an average 6% over their lifespan? Very popular when first marketed in the 80's and mostly market on the basis that a 6% return was extremely conservative!!

I think the way it worked was that 6% was used to calculate the premium but 8% was used to illustrate the surplus. Also note that these rates are net of tax.

 

[Bronte]

It may not be a good idea to cancel a term policy once the mortgage is paid off. Again confusion here as some people dont realise that the term policy is aseperate issue and is a requirement by law for a mortgage in most circumstances. Why does joe duffy not get an informed person to simply explain issues like this when they are raised. I thought it was ironic when he took the final ad break in this section there was a long ad for Irish Life.

But a term life insurance by it's definition ends at the same time as the mortgage. Your premiums stop. In my case because I reduced my mortgage term my policy is continuing but it's a pittance in premiums so I just never bothered cancelling it.

In relation to other types of life insurance policy, it's true to say that in general as one gets older one should not cancel them as the original premium tends to be a lot less than when you originally took it out when you were young fit and healthy.

 

[Bronte]

It is well known that he reads the comments on Boards when his show is live and learns from it as he goes. Unfortunately for him Boards is off the air at the moment so he is left to flounder on his own.

I missed this. Are you sure about this?

 

[Leper]

I listened to part of Joe Duffy's programme. Without rehashing both side of argument a very old lady was sold a financial product that when she could not repay in full she was hounded by the financial bods with ridiculous compound interest charges and fees which turned a relatively small loan into near full price of her house.

Whether the lady knew what she was signing or not is the huge issue here. Also, was the full extent of the product default explained properly to her? I'm with Joe Duffy on this one.

 

[Brendan Burgess]

HI Leper

Are you responding to this thread?

Bank of Ireland's Life Loan on Joe Duffy
or did they talk about Life Loans again on the insurance programme?
Brendan

 

[ClubMan]

Just listening to the show again, and its so clear that the majority of the public do not understand different financial products.
Callers are coming on and making incorrect statements and not being challenged on them. Many do not seem to understand the simple concept of what an insurance policy is for example.

A problem here is that at least some of the cases cited did not involve "simple" insurance policies but rather more complex/confusing/misleading combined life insurance/assurance AND savings/investment policies. At least some of which seem to have involved hard/misleading selling to (in some cases) uninformed punters.
But I agree that (a) more education/information is always a good thing and (b) Liveline isn't exactly the forum for balanced and informed/informative discussion of such issues.

 

[Bronco Lane]

I listened to part of Joe Duffy's programme. Without rehashing both side of argument a very old lady was sold a financial product that when she could not repay in full she was hounded by the financial bods with ridiculous compound interest charges and fees which turned a relatively small loan into near full price of her house.

Whether the lady knew what she was signing or not is the huge issue here. Also, was the full extent of the product default explained properly to her? I'm with Joe Duffy on this one.

This must have been something that you thought you heard.

I understand that she purchased a product in full knowledge with assistance from family. There was a solicitor involved also. She wasn't hounded by anyone. The interest rate charged was acceptable at the time by the purchaser. What fees were charged?

 

[Brendan Burgess]

I listened to the bit with John Lowe on it yesterday. He gave a good explanation, but unfortunately did not challenge the €20k turning into €185k nonsense. In particular, he gave a very good explanation for why Life Loans are a very good product.

Joe Duffy 19 January Transcript from 16.37 John Lowe

Lowe:

There are three types of life policy

· Mortgage protection – reducing if you die while you have the mortgage, your mortgage will be paid off

· Level term

· Whole of Life – never going to end

If you want an investment aspect, it should be explained clearly, but it never is.

Putting the money in a credit union is not a good idea.

You only need life cover when you have dependents. If they are in their 20s or 30s, they are not depending on you.

Life Loans

Joe: A €20k loans has turned into €185k

Lowe: They doubled every 10 years as a rule of thumb.

I went to a house in Torquay Road and it was a kip because they had no money.Their kids had a great time on the sales proceeds after the parents died.

We have an ageing demographic

Joe: So you are saying that the life loans are a good product

Lowe: I would be quite happy to take out a loan if I had no income

 

[Steven Barrett]

Joe was in fine form today. Possibly the fruitiest was his shock at hearing from the person whose term assurance ended at age 65. A scandalised Joe observed that after 65 was when you really needed life assurance. He opined that life assurance at younger ages (when you had little chance of collecting) was nothing short of "gambling against yourself". When Joe asked how much they got back when the policy terminated and was told zilch he became apoplectic. He questioned how could (such gougers) need a taxpayer bail-out.

Just for clarification to those who might have accepted some of this, a term assurance to age 65 in the majority of situations would be an exemplar of good advice. And of course Irish Life did not receive a taxpayer bail-out.

This was by a long way the worst performance I have heard from Joe. His total ignorance combined with his gratuitous accusatory language seems to me should be legally actionable.

I haven't listened to the podcast (it will drive me nuts) but Joe is completely missing the point of life cover and when it is needed most.

When you are young, your financial capital (your wealth) is low but your Human capital (your ability to earn) is high. The purpose of life cover is to protect your human capital. In the case of premature death, the life cover plan is to replace all that lost human capital.

For older people, their human capital is low but their financial capital should be high, so if they die, there is enough wealth already there so their dependents are looked after financially. So while the chances of you dying at 65 is much higher than if you are 35, the financial consequences are much lower.

Of course, life cover is also there to protect against debt too.


Steven
www.bluewaterfp.ie

 

[Brendan Burgess]

I haven't listened to the podcast (it will drive me nuts)

Hi Steven

It will drive you nuts.

I listened to Monday's and I attach a transcript.

I had mistakenly thought that John Lowe was on.

Brendan

 

[Brendan Burgess]

Having listened to the programme, I now have a better understanding of why the Ombudsman upholds only 10% of complaints.

"Dear Ombudsman
I paid an insurance premium for 20 years.
I didn't claim.
But the insurance company is refusing to give me my money back.
It's a disgrace."

Brendan

 

[Duke of Marmalade]

A mantra is developing on the thread that "simple is good" and "complex is bad (or even deliberate gouging)". It should however be noted that Joe reserved his greatest gasp of indignation on hearing of the guy who got zilch back on his expired term assurance. Simplicity is therefore not a protection against Joe Syndrome which holds that all financial institutions are gougers and three card trick men.

 

[Steven Barrett]

Hi Steven

It will drive you nuts.

I listened to Monday's and I attach a transcript.

I had mistakenly thought that John Lowe was on.

Brendan

Nope, I'm not listening to it!


I'm well used to people asking me "what happens at the end?" when they enquire about life cover plans.

My reply is always the same "You go away happy that you're still alive to see the end of it"



Steven
www.bluewaterfp.ie

 

[Brendan Burgess]

Nope, I'm not listening to it!

it is a transcript. You can read it in about two minutes. I have edited out all the sighing.

 

[Bronte]

A problem here is that at least some of the cases cited did not involve "simple" insurance policies but rather more complex/confusing/misleading combined life insurance/assurance AND savings/investment policies. At least some of which seem to have involved hard/misleading selling to (in some cases) uninformed punters.
But I agree that (a) more education/information is always a good thing and (b) Liveline isn't exactly the forum for balanced and informed/informative discussion of such issues.

Because of the conflicting viewpoints on here I listened to this week's Monday show.

It was very clear to me that most people didn't really understand at all what they were signing up for. These are my impressions

- Nobody read the terms and conditions
- Terms and conditions referred to as gobblegood
- Reliance on agents to explain the products
- Reliance on agents lies to tell them the premiums would never go up by much
- No understanding of the products
- No understanding of the savings verus life issue
- An expert confirmed the agents didn't understand the products right up until the ninties
- Sold to poorer people - paid by weekly collection by agent in general originally
- None seemed to understand the policies would be reviewed
- Nearly all seem to have been contributing for years and got nothing back
- Nearly all seem to have received a review letter with an impossible new premium calculation to pay

Kieran - the experts comments

- Agents didn't understnad the products
- First 2 years of premiums = setting up fees, so nothing at all being saved (I presume he means commission to the agents)
- The next years premiums went in 'charges'
- Then eventually your premiums are going into 'savings' (seem to me to be 'investments')
- something about if you took savings you damaged ???
- Always allowed a review of the policy
- Life assurance a lot less for a younger person
- so complicated a solicitor would find it difficult to understand
- a mix up of savigns with insurance - that's the problem

My opinion

I think most people were duped into these products, they seemed to think they were doing the right thing for their families, to leave a little nest egg behind, something to pay for a funeral ( a lot of people have a pride in that in Ireland). What I really didn't understand is how many of the products were so badly managed/invested that there was zero payout in so many cases. I honestly could not figure out if these were death policies, life insurance, savings, seemed to be a bit of everything.

There was also a very big issue, I felt, about the fact it was impossible to take a mis selling case 30 years later when you discoer you've been sold a pup as it was clear most of the elderly people did not have a) the wherewithall to fight it b) the ability to fight it c) had dementia

Unlike the two articulate people on last week, with a different product, these people had no clue what it was they were signing up for.

Questions

- How man of these products actually pay out.
- Are their reliable statistics on these products
- Are these products just a licence to print money by life companies
- What is the regulation of them like
- Who looks out for vulnerable people that are clearly conned by these despicable hard sell people and companies behind them

 

[Duke of Marmalade]

Jayz! Joe is at it again today

I looked up a leading life assurer's website today. It seems the mixed savings/protection policies are no longer available. That seems to me a step backwards. Yes the product offering has been simplified but something has been lost. Let me give an example. I got the online quote for a 50 year old for 100K for 15 years. That amounted to c.€30 a month. I then got the Whole of Life quote for the same punter and that cost c.€120 per month. Yes the offerings are very simple to explain (still no guarantee Joe won't see imaginary three card tricks though). But let's say our putative 50 year old opts for the WoL cover but then when he retires at 65 decides he doesn't need that cover any more. Then, in Joe's vernacular, that extra €90 a month he had been paying for the previous 15 years would be "down the toilet". Under the mixed savings/protection version he would have got a substantial amount of those "extra" payments back as a surrender value.

 

[Bronte]

Life Loans

Joe: A €20k loans has turned into €185k

Lowe: They doubled every 10 years as a rule of thumb.

I went to a house in Torquay Road and it was a kip because they had no money.Their kids had a great time on the sales proceeds after the parents died.

We have an ageing demographic

Joe: So you are saying that the life loans are a good product

Lowe: I would be quite happy to take out a loan if I had no income

Therefore a good rule of thumb is

20K borrowed = 40K after 10 years, 80K after 20 years and 160K after 30 years?

(shouldn't this be on the Life loan thread?)

 

[Duke of Marmalade]

A little advice for anyone who has one of these WoL plans and is say over 65.

1. You should be assessing the situation now, not waiting for a premium review.

2. This is complex but financial advice may not be cost effective. Ask questions on AAM first as you might get the answers that way.

3. First thing is to ask yourself what exactly are your requirements for life cover. Many people in this age bracket do not actually need any cover.

4. Assuming you need the cover (or some cover) for whatever reason it should be noted that generally cover is more expensive on these plans. But that is for a reason, the reason being that you have what is called guaranteed "insurability" irrespective of your state of health. Unless you can complete a "clean" life proposal form you may not be able to avail of considerably cheaper term assurance options.

5. These policies were aka Flexible Whole Life policies. And they were reasonably flexible. You might want to reduce your cover. Also despite the call to increase your premium or reduce your cover you often have the option to refuse both. The catch is that the policy is less likely to last out your days.

6. If you don't need any life cover then the obvious advice is to cash in for any value that might have built up. My only cautionary note is that for policies taken out before 2001 these are quite tax efficient savings vehicles. Through a process of benign neglect the tax on the income in these policies has remained at 20% whilst Exit Tax on any other long term savings or deposits has been increased from 23% to 41%.

7. You may not need the cover but your health circumstances may be such that in Joe's crude metaphor you are on a good "bet" with the "bookmaker". Stretching the metaphor the bookie would be delighted to see you "tear up your docket". But the bet is no good to you personally so rather difficult dilemmas arise as to who should pay to keep the bet alive.

8. Finally nobody likes to think they have been ripped off. You may have misunderstood your policy and indeed a salesman would have got handsome commission but despite what Joe likes to believe you have not been "gouged".

 

[Monbretia]

Coincidentally I just happen to be dealing with a query from a relative re an Irish Life whole of life policy taken out in 2005, this has been reviewed once already and the amount dropped, this year's letter is showing a drop from 57k of cover to 31k for same premium or to retain existing cover of 57k premium doubles from 440 p.a. to 880 p.a.

Also says 'next review date may happen sooner if there are changes in any of the factors that affect the cost of your cover' so who knows how long there will be any affordable cover in this policy.

Assumed fund growth rate is 4.30% p.a. Now customer is a bit peeved as they wanted to get a few more years out of this policy, kids still in secondary etc, never really wanted it for WOL so don't know how that happened, term would have made much more sense in this case.