Guardian has said that policies with its beneficiary nomination tool Payout Planner in place accounted for 68% of its life insurance book at year-end 2023 and 74% of its life insurance claims paid during 2023.
The challenger brand added the figures were in “stark contrast” to the reported take-up of trusts according to Swiss Re’s October 2023 report Life claims: a beneficial direction.
In the report, written in conjunction with Insuring Change, the reinsurer said that just 17% of all new term policies were written in trust in 2022, and as a result a so-called ‘beneficiary gap’ exists of roughly four in five single own life policies.
Guardian’s Payout Planner permits policyholders to nominate up to nine beneficiaries when applying for their life insurance policy.
The tool aims to make it easy for it to be put in place and forms part of the application form, while also providing ongoing flexibility as these beneficiaries can be changed at any time.
Guardian explained beneficiary nomination plays a vital role in directing the money to the right recipient where the intended beneficiary is an unmarried partner.
It does this by giving legal entitlement of the death benefit proceeds to the beneficiary and keeping the pay out out of probate.
In the absence of a named beneficiary the death benefit proceeds will go through probate and because an unmarried partner has no legal entitlement to receive the pay out, it risks being directed to an unintended recipient.
This, it warned, has the potential to be an increasing problem under Consumer Duty given that ONS 2020 data and 2021 census data shows the trend for unmarried cohabiting is growing.
But the challenger brand also pointed out that by bypassing probate, beneficiary nomination also plays an important role in avoiding probate delays and helping families receive the money quicker.
According to the UK Parliament Justice Committee’s November 2023 inquiry into probate amid concerns over delays and consumer protection, probate can take up to 11 months.
The inquiry also showed that in the first quarter of 2023, the average time from application to grant of probate of administration in England and Wales had increased five-fold compared to 2018.
These delays, Guardian warned, can leave families without access to their life insurance pay out for that period unless either beneficiary nomination or a trust has been put in place.
Phil Deacon, head of claims at Guardian, said: “Now with five years of claims behind us, we’ve many examples that show our beneficiary nomination tool, Payout Planner, plays an important role in improving outcomes.
“We’ve experienced first-hand how it has helped us pay the money to the right person in claims where the couple were not married and there was no will in place.
“We’ve also seen how probate can hold up a pay out. On average for those claims where the policy was not in Payout Planner or a trust, we’ve had to wait 7 months between asking the claimant for the grant of probate and receiving it.
“Put simply, Payout Planner allows us to bypass this delay which removes an unnecessary cause of potential anguish for a policyholder’s family.”
Ruth Gilbert, partner at Insuring Change, said: “It’s really encouraging to see a high rate of take-up within Guardian of its beneficiary nomination.
“Because it forms part of the application process it’s easier to put in place than a trust, and it really makes sense as the default option when available to ensure the money gets to the right people.
“For clients with more complex cases or where IHT planning is the priority, a trust remains the best option, but for the vast majority beneficiary nomination is the simplest option to achieve the desired outcome.
“We hope to see more providers put this in place to catch the many life insurance claim pay outs that would otherwise be directed to probate.”