Seven months ago, COVER launched its Promoting Protection campaign - one that warmed the hearts of m...
Seven months ago, COVER launched its Promoting Protection campaign - one that warmed the hearts of many.
Within the industry, protection is almost viewed as the poor relation compared to other areas, and there is absolutely no justification for this.
So, why is it that pensions (S32, drawdown, Sipps , A-Day) and investments (wraps, bonds, hedgefunds) are deemed more "sexy" by "brass plate" advisers, and mortgages and general insurance more popular than protection with mortgage advisers?
A large part of this is due to effort versus reward. For example, large fees available on mortgages and the fast implementation of an investment product with trail commissions offer hanging fruit ready to be picked by advisers. And good for them. All these products are necessary and good advice for many clients. However, losing the ability to work, a death in the family or a heart attack can negate all the wonderful work an adviser has done on their client's portfolio.
When clients buy a new home, whether it is their first or their fifth, they tend to buy it with their heart rather than their head in many circumstances. The home is an essential part of life where families are raised and happy memories and home life are created. It is hugely important to the nucleus of a family. To lose the family home through any unplanned event is unthinkable.
The mortgage adviser has the influence to reduce this risk and implement a thorough mortgage package. With flexible products that can be added to and changed, there are opportunities and requirements within Treating Customers Fairly (TCF) to revisit clients in order to amend and extend the protection that has been put in place to protect the family home. Insuring for unemployment, sickness, illness and death should ensure that the family income remains sufficient to keep the home.
The mortgage application process may be deemed a lengthy process by some, and it has been argued that bolting the protection advice onto the mortgage sale is too much for clients, but, with faster online facilities and other improvements, there should always be time to place at least some protection in order to maintain what has been put in place.
The mortgage client is perhaps the most obvious category of client requiring advice on protection but the protection part of the process should not be deemed the secondary or bolted on element. It should form an integral part of the mortgage advice process. If insuring the whole mortgage is too costly at the time of meeting, how about looking at family income benefit, which would cost less but offer insurance for the mortgage payments rather than the full amount to pay off the total mortgage? Offering less cover but offering some cover is better than no cover. And, a year after moving into a new home, the disposable income of these clients has nearly always increased allowing advisers the chance of another visit to improve the protection where necessary - all adding up to happy, protected clients and committed and esteemed advisers.
As for the brass plate brokers, surely the subject of Inheritance Tax mitigation underpinning pensions and investment portfolios has to be a major consideration. It is extremely difficult to cash in investments when the markets are poor if the client has suffered a heart attack, for example, without losing money. A critical illness (CI) policy can help soften the blow by allowing the client to chose whether to leave the investment until the markets pick up and live off the CI policy payout or take out the investment and mitigate the loss by the proceeds of the CI policy.
A colleague of mine once said that "it is only liquid millionaires that don't require some CI protection". The truth in that statement becomes clearer every year.
With the large amount of middle-class families now choosing to educate their children in the private sector and the lengthening period these children are now remaining in education and increasing the time of their dependency, school fees should always be underpinned. Changing schools mid-syllabus could be an educational disaster for many kids in addition to the parent suffering a critical illness and not being able to continue paying for the current school. Belief that protection products can prevent these situations needs to be made clear.
Another reason recommendation of protection is limited at present is due to advisers being uncertain as to what is actually covered nowadays. Since phrases like "future-proofing" have evolved, firms are inundated with questions from advisers asking for an explanation and looking for reassurance that they are safe to recommend CI products. There is now a culture of fear that CI policies may not do what is expected of them. Within the industry, there is a need for more clarification and training for advisers. Scottish Provident made a point of communicating the implications of Statement of Best Practice of CI to advisers as it felt this had not been made clear enough for them from any other channels.
Now is a very important time for advisers to spend time with sales consultants from the life offices in order to ask and learn about definitions on CI products, TCF and the implications of the Statement of Best Practice. Rather than following the Association of British Insurers' (ABI) minimum-worded definitions, a few providers have chosen to exceed some of the definitions in order to maintain what they deem to be essential benefits for clients. These definitions do come at a cost, which is why it is so important for advisers to understand what plans will fulfil clients' expectations and which will not. Actions like this, the industry hopes, will prove that the plans are beneficial and help over time rebuild confidence in this concept.
Reality
Sales are down in the CI market and the lean is more towards pure life cover. This illustrates that there is confidence in the latter and not in CI. The concept of CI is not wrong. If a client is seriously ill, they should not be wishing for death to relieve their financial pressures. Quality of life is dependent on income and health; prosperity and health go together like Bodie and Doyle, Hinge and Bracket and Posh and Becks. If advisers encourage their clients to complete the application form fully and do not sell on price alone, then clients will benefit from the CI concept at a time they most need to.
National press coverage is another issue. With so much negative press, it is very hard to portray a beneficial product as such. The majority of cases that are highlighted in the press are quite unjustified. Most of these cases are non-disclosure and, in many instances, where the application form has been completed with a constant row of ticks in the 'no' box. Including "no I haven't seen my GP for a number of years about anything" and then when a claim is submitted it is found the client, had within the last year, had blood tests or scans that they failed to mention. Of course declining payment of a claim is an emotive subject and the national press love an emotive article. Finding a way to counteract this is a necessity and the industry needs to campaign in a united method and portray the concepts and intents of protection as a true and trustworthy benefit.
There are huge amounts of 'good news' stories where clients are so happy that they are prepared to 'go public', but it does not make great reading in the press. However, it has been proven that clients are very reassured by being able to see real-life case studies. Perhaps insurers should put up billboards nationally with headlines of the vast amounts paid out.
So where does the industry go from here? The improved format for application forms will encourage more disclosure, which will eventually lead to less declined claims and more confidence - but this will take time. The new definitions in relation to the Statement of Best Practice will make it clearer what is and what is not covered; but, again, this will take time.
The industry needs education and promotion, a few more questions on protection during the regulatory process and training of advisers, more promotion as a united industry both in the public domain and our own industry but above all communication. It should come from the top. The filtering down of clear messages from the ABI to the providers, from the providers to advisers and then culminating in clear messages and feel-good factors transferable from adviser to client.
Alison Turner-Holmes is head of marketing of UK new business at Resolution
