Fortis' long-awaited launch was worth the wait
An indication of the real demand for innovation in the protection arena has been the almost universal acceptance of the Real Life Cover Plan from Fortis. Nobody could accuse the provider's entrance to the market of being low-key as the product fills a yawning gap in affordability for the majority who are not currently buying protection.
Essentially the product is based on the principle - espoused by the FSA among others - that some cover is better than no cover and offers stripped-to-the-bone protection. As Tom Baigrie, managing director of LifeSearch, which initially devised the concept of the product, pointed out, 70% of the industry's protection sales involve death-only cover.
This is clearly a worry. In the best of all possible worlds, everyone who needs protection would own comprehensive policies but few would seem to have the money, inclination or even awareness to buy these products. The UK has a £2.3trn life assurance and £190bn a year income protection (IP) gap.
As Roy McLoughlin, senior partner at MasterAdviser, said: "The Fortis offering fills a real gap in the market due to affordability. It is innovative and a true menu product. We have been crying out for this sort of thing for years."
The plan comprises of two sections. The first, the life fund, is a pretty standard death or terminal illness lump sum pay out. However the second, the living fund, offers a cut down version of IP and critical illness (CI), child and partner carers' cover and recuperation cover, both of which pay out a lump sum. The IP cover pays out for only eight years while the CI covers only heart attack, stroke or cancer.
An especially impressive aspect of the plan is that, crucially, if an illness does not meet the definition for CI, the income claim will pay out instead, as long as the claimant cannot work.
Real Life has not proven to be controversial and no provider has gone on record with a criticism of its principles. Indeed, Royal Liver has announced that it will follow Fortis with a similar product while Bright Grey and Friends Provident told COVER they were keeping a close eye on the concept.
As COVER goes to press, the list comprises of LifeSearch, Best Deal, Highclere, MasterAdviser, CBK Colchester, Click and Torquil Clark. All are well known as specialist protection IFAs but Fortis has confirmed that its plan is to roll out across the entire market in a matter of weeks.
It is when this product becomes available across the board, especially to those intermediaries with substantial mortgage business that we will see if this concept really flies. The present crop of IFAs selling it are hardly typical. As McLoughlin said: "We must understand that, in the present markets, this product is a really important matter for mortgage brokers."
The UK life protection market needs new players, especially those who are willing to support customer centric innovation. Fortis and LifeSearch are to be applauded.
