The proportion of protection policies being placed in trust has risen substantially over the past five years, according to sales data from Stonebridge.
The mortgage and protection network said figures from one of its six key providers showed the proportion of life policies written in trust increasing from 5.3% five years ago to 14.3% today.
That compares with 13.1% a year ago, while Stonebridge said its advisers place close to 25% of policies in trust on average across the network.
The figures come as the protection industry considers how trusts and nominated beneficiaries can be used to reduce delays in getting insurance proceeds to those for whom they are intended.
PROBATE DELAYS
Life insurance policies can provide beneficiaries with substantial payouts, but where a policy is not held in trust the proceeds can form part of the policyholder’s estate and potentially become subject to the probate process.
Placing an appropriate policy in trust can allow the proceeds to be paid directly to the trustees rather than waiting for probate, potentially giving beneficiaries faster access to money at a time when they may be facing financial pressures.
Stonebridge said comparisons between individual providers should be treated with caution because product and customer demographics vary. However, it believes the increase recorded in its sales data indicates greater consideration of trusts as part of the protection advice process.
The issue has also been highlighted by the Financial Conduct Authority in its Pure Protection Market Study final report. The regulator has encouraged greater use of preparatory measures, including trusts and nominated beneficiaries, to help claims reach intended recipients more quickly.
The FCA has referred to potential problems at the claims stage as the “beneficiary gap”, where insurance proceeds do not reach intended beneficiaries quickly and effectively.
John Scrivens (pictured), sales director at Stonebridge, said: “When people choose policies, they are often solely focused on the amount of cover, but their loved ones need the money in their pocket in order to benefit from it. Time can be a real factor.
“Using trusts protects beneficiaries from the nightmare of vital funds being locked up in probate, which makes them a crucial pillar of the advice brokers should be giving consumers.
“All too often, funds are withheld from the bereaved in their time of need because a trust wasn’t considered when the policy was taken out. Fortunately, times have changed and advisers are increasingly conscious of the circumstances in which trusts are most appropriate and their benefits.
“We’ve been banging this drum for a long time, and it has rightly been identified by the FCA as an important focus area. The industry will be better for it, and consumers won’t be left needlessly vulnerable.
“Policies shouldn’t be placed in trust automatically, but we’re pleased that our network members are identifying increasing numbers of cases where trusts should be used.”
