IP: Provider's rapid exit from the market could be a wake-up call for brokers
Paymentcare has set up a special IFA helpline to assist the thousands of consumers who have been abandoned by Cardif Pinnacle following its decision to withdraw its income protection (IP) scheme at the end of July.
In response to Cardif Pinnacle's move, Paymentcare is now offering its services to the 3,000 who have been left without cover.
All customers switching to Paymentcare will be provided continued cover, with no initial exclusion, no matter what their occupation.
Commenting on Cardif Pinnacle's decision to withdraw, Shane Craig, managing director of Paymentcare, said: "It is no wonder that people are sceptical about products like income protection.
This is a classic example of actions that bring the industry into disrepute in the eyes of the consumer and justifiably so." The French-owned insurer, Cardif Pinnacle, issued a notice in June, which stated that it would cease offering IP to Salary Protect customers with effect from 20 July 2005, leaving clients with only one-month's notice.
In a letter sent out to its customers, it said it deeply regretted having to close its IP business and cited "circumstances beyond our control" as the reason it had decided to withdraw.
However, defending its rapid exit, the provider referred to a section of the policy that allowed for a 30- day cancellation period and the correspondence also included a pack with details of a new policy.
"The addition of a new cover makes the 30-days cancellation period entirely legitimate," said Richard Verdin, sales & marketing director at Direct Life and Pensions.
"According to the baseline requirements set out for this type of income protection cover, which effectively is a payment protection insurance, a company can pull out of the market at 90 days notice or after 30 days notice if offering substitute cover," he explained.
Verdin is worried this may not be highlighted by other insurers.
"I am concerned that Cardif Pinnacle's withdrawal may be hijacked by other providers selling the product in order to up their own sales.
However, the problem does not lie within the company, but rather in the product itself.
Therefore, all companies selling payment protection insurance could withdraw from the market just as quickly," he added.
Verdin thinks the latest debacle is a wake-up call for all brokers out there selling payment protection insurance (PPI) that they need to highlight aspects of the product, such as its limited cover, that may not be so attractive to customers at the point of sale.
He also believes that the Association of British Insurers and the Council of Mortgage Lenders should change the baseline requirements for PPI.
