Cover for locums and house people are two areas of protection that are often ignored. Phil Calvert explains
January was 'one of those weeks' for the industry, where common sense was sacrificed in an attempt to bring so-called fairness to the public. The distribution of wealth is not equitable and probably never will be, so countering the argument that those on lower incomes can be given a second-class service because they currently get a no-class service just does not wash.
It is obvious to anyone that what the public wants is good value advice that can be trusted. If people want to pay for advice that is fine. If someone else pays their adviser in lieu of the fee ' so be it.
But would you be prepared to pay for advice on some protection products? It seems unlikely. But is that the real issue? Surely we should be looking more at improving the skills needed to encourage greater take-up of protection?
No compromise
It is easy to allow the polarisation debate to run like an out-of-control roller-coaster. What really matters is that the sale of protection products is not allowed to be compromised. The latest sales figures from the Association of British Insurers (ABI) hail good news, showing a marked increase in adviser-sold products. Income protection (IP), critical illness (CI) and non-mortgage-related term assurance showed increases of 35%, 30% and 17% respectively and this provides a strong platform for further growth.
It has been said that some of this can be accounted for by recent events, and in the US the events of 11 September have reaffirmed the importance of family. And to some extent many families in the UK have also become closer. The enormity of the events in New York has somehow jarred many people into thinking much more seriously about protecting the things they value.
This tells us something about the psychology behind the reasons people buy protection. By and large, people will not buy protection products until they can see for themselves how a life-changing event would affect themselves and their family. Only then will they take action. So it follows that intermediaries who make the effort to help clients talk in detail about their hopes and fears for their future will find it easier to increase sales of protection.
Unexpected costs
Here are two examples of how intermediaries can find plenty of new business:
A partner in a dental practice for 40 years had never had a day's illness in his life. He collapsed on the golf course with a heart attack. After the operation, his consultant told him he could not work for a year ' let alone play golf.
At the back of his mind he remembered something in the partnership agreement that said if a partner was off sick for an extended period, a locum should be brought in.
Knowing plenty fellow dentists this was not a problem, but at around £500 a day this put a new perspective on the situation. However, he could have insured locum costs under a special IP plan designed for this eventuality ' Professionals' Expenses or Locum IP. 'Why didn't my financial adviser tell me about this plan?' was the inevitable response.
Ironically the relationship with his adviser had been strong, based largely on trust, and his recommendations had always been taken up. And the fact that his adviser took commission was simply never an issue.
This begs the question how many other small professional partnerships are out there that should take out this cover ' today?
Another protection product that demands extra attention is housewife or houseperson's IP. Unfortunately it is the sort of product that is often considered as a gimmick, but given some of the hair-curling case studies it should be taken far more seriously.
Left holding the baby
Tim was a senior partner at a large accountancy firm in the City of London whose wife suffered severe post-natal depression after the birth of their second child.
She ended up in hospital for over a year, leaving Tim literally holding the baby. He was fortunate that relatives lived nearby and were able to step in. But out of the blue about three months after the child's birth, Tim received a call from Social Services who wanted to check the children were receiving proper care. Had they not been, the children would have been put into care.
A story like this gets you thinking ' surely every family with young children should take out houseperson's IP as a matter of course ' and regardless of cost?
Whatever direction intermediaries decide to take ' tied, independent or something else ' protection must continue to rise higher up the agenda.
Phil Calvert is proprietor of Training Strategies 2002
Email: [email protected]
