Building close relationships with providers will help IFAs make the most of the income protection market, writes Phil Calvert
The ASsociation of British insurers (ABI) statistics spell good news for the protection market. Sales continue to rise as more IFAs see the merits of increasing their focus in this sector.
Discussions with providers reflect optimism for the future, with the grand prize being electronic trading of all protection products.
Clearly some providers are further along the line than others, but even they have some way to go. Providers have an extraordinary balancing act to achieve between price and value, and the drive towards electronic trading should not compromise quality.
Unfortunately most protection business is written on premium. With regards to term assurance, that is fair enough ' a client is either dead or alive ' so it is either a claim or it is not. Income protection (IP), however, is different. There are so many ifs, buts and maybes that are preventing a surge in sales.
An easy life
There is a perception among IFAs that the process of writing income protection is a minefield ' from explaining the concept to clients, comparing quotes, completing application forms and underwriting, through to making a claim.
But there is a great deal that IFAs can do to make life easier for themselves.
l Make the effort to get to know the products of four good IP providers. Do not rely solely on the technical details provided by the various central sources of information available. Ask broker consultants to specify their key strengths. Their marketing departments go to great lengths to identify their unique selling points (USPs), and while some are a little obscure, they can make a big difference to your sales.
For example ' a small number of providers use a client's age at the outset of the plan to cost annual RPI benefit increases ' whereas most use the rate for the client's age at the time of the increase. While the premium at the beginning of the contract may appear slightly higher on plans that use age at outset costing, the total premium paid over the whole term is likely to be considerably less. When choosing a provider for increasing benefit income protection, this demonstrates why providers should not be chosen simply on the cheapest premium at outset.
l A detailed knowledge of a provider's strengths will help advisers to target clients more effectively. While most providers offer good value across a range of clients, some are more appropriate in terms of the benefits offered. Pioneer Friendly Society has gone to great lengths to not only simplify IP, but has also made its plan attractive to many different clients. While it will not accept some high-risk occupations (divers, trawler men and so on) there are neither occupational nor gender loadings. It can offer a benefit back-dated to the first day following incapacity, and an element of tax-free saving.
Pioneer also has an excellent approach towards claims ' which is what IP is all about. So while it offers deferred periods up to 52 weeks, this company should be on your list for those clients wanting simplicity and an early payout.
l Do not skimp on the application form. Do not think that by leaving off information it will make the case go through quicker. It might do ' but a future claim could be jeopardised.
Many IFAs put pressure on providers to simplify application forms with fewer questions. There is obviously a marketing advantage to doing this from the providers point of view, but it can cause problems later. Providers should not be afraid to put more questions on their application forms if it will help them to gauge the risk more clearly.
It cannot be stressed enough how important it is for clients to complete the proposal thoroughly. Just because the form might not ask a question about your health or hobbies, it does not mean you should not mention something that could be relevant. It is very much in the IFA's interest to clarify this, as the last thing an adviser wants to do is tell a client their claim has been rejected.
The trick is to answer the questions fully, then provide additional supporting information. If a client declares they ride horses, supply the missing details ' how often, whether or not competitively, level of experience and so on. If a client has recently become self-employed, help the underwriter with projected earnings, contracts in the pipeline, what they used to do and so on.
l Also get to know the underwriters. There is still a perception they are locked away. This is no longer the case and they want cases on the books as much as the IFA, and if there is good communication, life will become very much easier.
l Finally a tip for providers ' get your underwriters out to meet IFAs. Run a workshop on the joys of income protection; show IFAs how your USPs should be put across to clients; demonstrate how your technology can be used to increase sales; prove to IFAs that you pay all genuine claims; and finally ' ask your chief underwriter to talk for 25 minutes on how they underwrite a 'typical' case.
In short ' forget price. Build close, meaningful relationships with a small handful of providers to meet a variety of client needs.
Phil Calvert is proprietor of Training Strategies 2002
Email: [email protected]
