The study suggests offshore life companies need to urgently adapt their business models or they will find future profitability increasingly threatened.
The report showed that while such policies can provide good investment returns and value for money if contractual payments are maintained throughout the lifetime of the policy, such longevity was extremely rare.
It found only 4% of regular premium policies sold to clients in the Middle and Far East reached maturity over a typical 20-year term.
Furthermore, according to the research, which was conducted by cross-border life industry consul-tancy firm Acuity and used aggregated international market data, premiums will only be paid for an average six-and-a-half years on a 20-year policy.
Additionally, the research found that on average every year 15% of total issued regular premium policies are surrendered or stop paying premiums. One of the main reasons for the lack of per-sistency is the high upfront commissions life companies pay advisers.
The data showed advisers received more than 80% of the total commission due on a 20-year plan within a month of the policy commencing – giving them no financial incentive to advise clients to keep the plan active because it had negligible bearing on their income stream.
Simon Littmoden, head of UK international sales for JPMorgan Asset Management, said: "This research was commissioned to help us better understand the offshore IFA marketplace and the product palette of our international insurance partners.
"The findings will help us deepen the conversations with our insurance clients and hopefully contribute to the evolution of offshore product as global markets see increasing regulation."
