So, income protection has been left out in the simple product cold. John Bridge assesses whether it will ever join the gang.
• Principle 3: Standardised product names that clearly identify the nature of the product.
Income protection does what it says; it protects income. A standard name for the product is to be desired so that the customer understands what they are buying. However some call it permanent health insurance (PHI). This serves to confuse not only the customer but often the confused include industry practitioners.
This should not preclude imaginative brand names with clear descriptions. This need not jeopardise understanding and has precedents in marketing for instances there is no doubt that Dulux is paint.
• Principle 4: Conditions, options and exclusions are limited to what is appropriate, reasonable and necessary for the product, and are simply explained.
Conditions and options of course must be kept simple and explained in words that avoid jargon. Any reasonably competent marketing department will strive for these ideals Exclusions are a problem to foresee other than in individual cases.
The simple objective might be to exclude all pre-existing medical conditions without exception. This will however preclude customers who are seeking cover for that condition and are prepared to pay a loaded premium for the privilege.
So, at the risk of simplicity, exclusions must be left to the underwriters to load individually. It is the clear explanation of this to customers that maintains the adherence to the simple criteria.
• Principle 5: A straightforward and clear purchasing process for the consumer.
The product must be accessible. There will be no industry objection to any simplification of the advice and subsequent purchase procedure.
• Principle 6: Ancillary fees and charges for exceptional items are transparent, reasonable and predictable.
Clear methods of informing the consumer about the current prices and returns and any changes, as well as appropriate regular updates on the status and benefits of their product.
Income protection is a straightforward monthly premium product for benefit in times of illness that keeps the customer off work with no income. Most providers clearly display the cost depending on age and income and the proportion of income covered. This is already a simple concept without the complication of many investment products.
• Principle 7: If a product loses its accreditation certification the customer should be told and there should be no penalty or charge for the customer to exit the product.
Income protection is a monthly premium product. Cancellation is without penalty.
Conclusion
In reply to the question can income protection comply with these requirements of the simple product, of course it can and in the case of many provides already does so.
It is unfortunate however that in the principles listed above the report did not find it necessary to mention the most important aspect of income protection and this is the claims process. Income protection gives support when it is most needed when customers are at their most vulnerable.
Unless the provider offers simplicity in claims as well as features and pricing the product has little value. We should add this as a requirement that providers provide clarity in their claims procedure and past performance.
Simplicity is fine and to be welcomed. It must however include choice based at least in part on simplicity of claims and the provider’s propensity to provide the benefits promised by the product.
John Bridge director of sales and marketing at Cirencester Friendly
