In an effort to create a protection panacea, a number of providers have launched packaged products i...
In an effort to create a protection panacea, a number of providers have launched packaged products in recent years. These are products which combine different elements of cover within a single contract or those policies which offer a menu of benefits from which the client selects the most appropriate
Menu products
Based on a term or whole of life contract, the latter plans combine a range of protection covers in one contract for one monthly premium. By allowing any combination of benefits these plans aim to be as flexible as possible in recognition that each individual will have different protection needs
Scottish Provident's Self Assurance range was one of the first menu products on the market. Roger Edwards, product marketing manager, says: "We took a close look at the protection market and were concerned by the lack of flexibility in the products and saw the inconvenience to consumers of buying different protection products for different needs
"We found that people are becoming more appreciative of the need for protection, but the man on the street may not understand the differences between policies they just want money when things go wrong
This approach to protection has advantages for the customer and for the adviser
The primary attractions for the customer are cost and convenience. "Choosing the packaged product means that rather than paying four types of charges and filling out four types of forms and setting up four direct debits, the customer only has to do one for the whole product," says Edwards
In an environment where term contracts are becoming increasingly commoditised with direct writers making more of an impact, the menu approach relies more heavily on the provision of advice. "Prior to menu benefits price was becoming the only differentiating factor between term-based products. This method turns protection back into an advice-driven sale
Its flexibility allows the IFA to genuinely add value to the sale. "The IFA does not have to shoe-horn clients into rigid, inflexible products. It gives the IFA the tools to offer an advice-driven solution to customers," says Edwards
With so many different combinations available these products can at first look quite confusing. The most comprehensive plans have been designed to meet the complete protection needs of three separate markets the mortgage market, the personal market and the business market, under the umbrella of one protection range
While they may appear to be complex, Simon Barwell, personal finance marketing manager at Swiss Life, explains that they are designed to make life easier for advisers. "This means we can sell all the protection products the IFA will need in a 'one stop shop'. Before the IFA would have to spend a lot of time scanning all the products on the market," he says
Compromises
However, Brian Lentz, IFA at Portfolio Insurance Consultancy, believes that while these types of plans do have a place in the market, they are not perfect because, by purchasing 100% of cover through one provider, policyholders may be forced to make compromises on rates and benefits. He says: "In an ideal world people would purchase individual policies from different providers to get the best terms, where the amount insured is such that the claimant will have no further financial worries. Due to cost and a prioritisation of needs people must often arrive at a compromise
For many who cannot afford the cost of separate policies the only other alternative would be a first-event or accelerated scheme where life cover is lost after a critical illness claim, unless life cover buy-back is available
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