So, you haven't sold income protection to your clients. What's the worst that can happen? According to John Bridge, an awful lot...
IFAs are required by the regulator to consider all aspects of their clients’ financial situation and wellbeing. So why is this basic advice overlooked in 93% of cases? An interesting reply to this query that has been heard from both IFAs and their clients is that critical illness (CI) cover is a feature of the life cover – a basic misunderstanding of both the needs of the public and the features of the respective product.
CI cover does not replace IP. It is of no use to the taxi driver who breaks an ankle and is off the road for six weeks. Consider the factory worker with asthma or another requiring a hip replacement. Consider a long-term nervous complaint. These conditions are common and IP is designed to give the peace of mind that workers need, particularly in the current economic climate.
And yet in October, COVER’s 360 survey said: “Advisers are selling more critical illness products than income protection products because they are more transparent, easier to explain and can be linked to a mortgage.” Whether these perceptions are true or false, the fact is comparing CI as an alternative to IP is like considering that an egg whisk substitutes for an egg cup.
Aviva and Unum have committed substantial marketing spends on TV to educate the public that IP is important. Their efforts are to be applauded, despite their well-publicised shortcomings. Yet many industry professionals have not grasped the concept of IP. Have we identified a training need to be addressed?
COVER 360 went on to state: “Only 5% of IFAs will be recommending IP in the next 12 months.” How can the best interest of the clients of the 95% not selling IP be safeguarded? Thankfully, the survey concluded that IP products must “form the basis of sound financial planning, especially as payment protection insurance sales will inevitably drop”.
To convince the public and IFAs that IP is a must, the product must be simple, easy to explain and affordable, while genuine claims must be paid. The product could not be simpler. Income is replaced when illness strikes. But people have differing needs. Some of these are obvious at application stage and the skill of the IFAs, or at least 5% of them, is to match the cover to the client.
The diverse needs of the self-employed and PAYE clients are obvious, deferred periods to match the employer’s policy on sick pay and level of cover. Exclusions can all be accounted for. The unknowns are the period of incapacity and the capabilities after recovery making the definition of cover a crucial decision dependent on these unknown factors.
