Whether individual or group, Wojciech Dochan and Linton Penman believe advisers can benefit from income protection's additional benefits and technology.
As the global economy continues to lurch through the stormy seas of Recession (with a capital R), the concept of certainty is a tricky one. With employment uncertainty continuing to dominate the news, we are left with a philosophical and moral question; how can we create stability and reassurance where there is none?
The role of financial advisers in an environment beset with the mistrust of financial institutions – in fact most institutions – is a very important one, and advisers who know their stuff should be well placed to position themselves as a trusted partner in wealth/lifestyle management (for individuals) and business management in the round (for companies).
Income protection has long been bemoaned by providers as the Cinderella product of the industry – the second cousin, the sibling with hidden talents, looking for a latent opportunity to shine. But while it pays to give a bit of airtime to the gloomy predictions of a perilous few years ahead, what advisers need to do is seize this opportunity to market protection to their clients.
It is the first time in recent years that we have had the right foundations in place – or ‘green shoots’ to coin a popular phrase – to help individuals re-prioritise what is important in life and think about protecting what they value most against an uncertain future.
Protection has major role
While the message to companies is different, its essence is similar: here are businesses challenged to the hilt – trying to find ways to manage through a recession, keeping their staff engaged through cost-cutting and streamlining exercises, all while trying to hang on to their customers by maintaining quality and service. Protection here, too, has a major role to play – if it is used correctly.
Where employers may have struggled to see the value in the past is evident in the way they often resist communicating to their staff that they have protection in the first place: fear of an influx of claims may be one reason, but is unfounded. In the USA, where protection as part of a benefits package is far more extensively deployed, enlightened employers maximise the value of the insurance at a staff level by letting them know they’ve provided it for them. Engagement is often higher as a result and absence, unsurprisingly, is not.
There are many ways to slice a cake, and the same applies to how employers can look at their benefits structures. Protection these days is far removed from the ‘one size fits all approach of the past: tailored solutions fit for today and tomorrow are where providers are going. Talking to businesses to find out what’s important to them features strongly in product development and research.
Far-sighted providers have been looking in recent months to how they can create tangible value added services for employers to help them in their day to day business. Providers have helped to create and embed rehabilitation services for clients, and Unum has extended this recently to include legal information and advice for employers. Businesses of any size can benefit from assistance with employment law, company law, marketing and tax – a great benefit when you consider that the British Chambers of Commerce have found in their recent workforce survey that employment law is a major problem for small firms. Some 47% of 3,400 businesses that were questioned confirmed that they face difficulties navigating the legislation.
Besides the obvious labour market benefits of a positive employer profile leading to more positive employee relations, employers are more likely to be influenced by the proactive nature of the Employee Assistance Programme (EAP) bundled with an income protection plan in supporting employees. Having such an income protection policy linked with an EAP in place may reduce the chances of an employer having to face potentially damaging disability related claims, as an EAP can give early warning indicators of issues arising. Likewise, bereavement services have been added to Group Life contracts.
Policies have useful features such as cover for dependants, and some have continuation cover – essentially meaning that, should an employee leave its current employer, they have an option to take their cover with them as an individual.
While the current climate of fear around redundancies isn’t one any of us would say is good for our health, it does highlight the tenuous nature of our ability to earn an income. Advisers need to be sure when talking to individual clients that they clearly explain the difference between redundancy cover and income protection as, while the benefits are the same, the basis of cover is quite different.
Click and go
The relative complexities – at least to the uninitiated – of the various forms of protection make it a challenge when it comes to buying online. While the internet is invaluable in terms of enabling easy access to information that can form the basis of what is effectively desk research into the product benefits, its impersonal nature means ideally it should not be used in isolation.
Advisers on the individual side can benefit from the various portals, of course, but in terms of the customer making a decision, the nuances of the products simply aren’t easily communicated in the ‘click and go’ environment that works so well for travel, car and home insurance.
The drawback with the quotation portals used by advisers is, of course, that they inevitably focus attention on price. But products, and the extent of the cover they provide, vary widely, and by and large, you get what you pay for. So the insights of experienced advisers are invaluable in guiding the customer to the most appropriate choice for their specific circumstances.
Advantageous policy terms are not immediately apparent from a cursory glance at comparative rate tables: the absence of any standard exclusions; availability of ‘own occupation’ cover throughout the duration of the claim, not just for the first couple of years; the ability to retain cover at the same cost regardless of future changes in occupation or residence abroad; continued cover during periods while not actually working (such as redundancy, unpaid sabbaticals, time off to raise a family and so on); the option to benefit from significantly increased benefits after two years continuous claim payments are just a few examples.
The myth of the black hole
Where the web is invaluable, though, is for advisers: websites now offer an extensive range of services to help advisers guide their clients through the buying process. Features include case studies, exclusive adviser content, product developments, legislative updates, trends and statistics and interactive presentations. And the application process is so much simpler. The underwriting ‘black hole’, is rapidly becoming a myth from the darker recesses of IP history.
Tele-underwriting is ideal for those who prefer an experienced interviewer – paid for by the provider – to go through tricky personal confidences that we don’t like to discuss face to face with a relative stranger. By harnessing the power of the internet acceptance terms can be offered (and accepted) in real time for those who like to get things done fast.
As the recession continues to deepen, and job cuts continue, the pressure on individuals will increase. Not only is there a concern around income security but, for those fortunate to keep their jobs in companies forced into redundancies, this often means increased pressure as they take on the roles and responsibilities of their former colleagues. Income protection schemes, particularly those with a free EAP service, offer a real and very tangible benefit to employees pressed for time and trying to balance the demands of home and family in the current environment.
Wojciech Dochan, is head of commercial marketing and Linton Penman is head of retail sales and marketing, both at Unum
