Insurers cut bonuses on short-term policies

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The Independent Online
GENERAL ACCIDENT has started this year's round of bonus declarations by cutting payouts for 15-year with-profits policies by more than 5 per cent to pounds 15,442.

It has maintained payouts for 25-year policies at pounds 65,604, just up on last year's pounds 65,464. Figures are for a pounds 30-a-month policy taken out by a 29-year-old male.

Friends Provident also announced bonuses for the year, maintaining payouts on 25-year policies at pounds 61,636, but cutting payouts on 15-year policies by nearly 3 per cent to pounds 16,883.

Other life offices are expected to follow suit with lower payouts on short-term policies and maintained payouts on long-term ones. Philip Scott, general manager of Norwich Union, said: 'It is entirely as expected. The trend for bonuses to be cut will continue.'

The Prudential, the UK's biggest insurance company, predicted it would have to cut bonuses for the fourth successive year.

General Accident has also cut the bonus for 40,000 customers invested in its best-selling Portfolio Bond by 1 point to 7.5 per cent.

The Portfolio is one of the company's biggest sellers. Last year alone it took pounds 250m and it has a total of pounds 500m invested in it. In 1993, General Accident was the highest-paying life office for 25- year contracts.

Over the past five years the office has increased payouts on 25-year term policies by a quarter from pounds 48,062 to poubnds 65,604.

This year's bonus declaration means that some of the 3,800 policyholders with contracts maturing this year with a total maturity value of pounds 50m will have received an annual return on their investment of 13.6 per cent.

The company has announced a special additional bonus of 1.5 per cent for each year over 15 years the policy is in force.

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