With take up of sales in income protection (IP) by advisers so low, reflecting in low consumer sales, what could be done to the product to make it more attractive to IFAs, apart from increased commission?
Their new approach cleverly embraces the above concepts which appeal directly to the IFA, allowing an interesting and relevant client presentation to take place, resulting in more protection business being written.
We should not forget the importance of the technicalities of product design but unless we address these points, IFAs may never have the opportunity to discuss these finer details with their clients. So let’s sex it up, and drag IP screaming into the 21st century.
Chris Hulme, Clayton Hulme Partnership
IP has long been the poor relation when advisers consider protecting a client’s financial position, many preferring to rely on life and CI as the primary protection tools.
It’s not, therefore, a change of product that is needed, more a change of advice. Perhaps we should consider IP as the primary protector with life and CI secondary.
IP is a much harder concept to ‘sell’ with many clients believing either their employer or the state will pick up the tab for them. The Welfare Reform Act has worked wonders for advisers discussing IP but in an ever more budget conscious environment, cost is the next hurdle to overcome.
Revisions such as Friends Life now afford a two-year payout period with the ability to commute to a term payout if no claimable events occur within the first three years, potentially halving IP costs.
Whilst death and CI can adversely affect a client’s position, without the income to pay the premiums, retaining that cover becomes an issue. Payment of those premiums is entirely reliant on continued income.
Waiver is a form of IP that should be included on lump sum solutions of life and CI but the underwriting detail and inevitable delays prohibit this being included. Providers should consider easier underwriting of waiver on life and CI solutions.
It’s all too easy to blame the product but the need is out there. Aviva have started the education with Gary’s Story, its up to us to bring it home to the client.
Phil Veale, Chiltern Consulting
There have been continuous debates about how to increase IP sales for at least the last 20 years. Why is this? There’s a number of reasons, not necessarily definitive, but worth considering.
First, is the same old story of customer priorities. Sky subscriptions, for example, have more focus on a day to day basis. “I can use my TV every day, but how often, if ever, will I use IP insurance?” The ultimate risk to income is not an issue, while it’s not real today, despite the size of the impact if there are health issues which prevent work.
Then there’s the product. Most insurers have tried to match or incorporate the state benefit system. There are two major problems with this: the state benefit system changes at will, defeating the product developer’s intentions, but notably over-complicates the customer offer.
There is also the issue that the claim triggers for state benefits and the insurance policies don’t necessarily match, so why bother? Then what about short-term vs long-term payment products? They are not mutually exclusive and do sit very well together and can address the impacts of shorter-term sickness, as well as long-term.
Underwriting has had its critics, but in today’s world, there are some really innovative approaches, which should negate both consumers’ and advisers’ past concerns.
And finally, promotion. Given the points above, with a little clarity of message, surely IP can gain some positive coverage.
