It is all very well selling a policy - but if it lapses it does nobody any good. Toni Smith examines retention strategies.
Nobody would disagree financial advisers have a duty of care and indeed a moral obligation to ensure that their clients have the protection that they need. But it is not just about the sale, advisers have just as much of a moral obligation to ensure that the policy stays in force for the duration of time it was intended or until new circumstances mean it’s no longer appropriate in its current form.
Much of this is down to how the policies have been sold; if a client truly understands why they have the protection policies that they have and understands the need that they are meeting then they are much more likely to keep up payments on those policies.
However we all know that unforeseen events happen in life, in fact it’s in order to guard against unforeseen events that we encourage people to take out policies in the first place
When times are tough and a client starts having financial problems, maybe increases their debt or the size of their family, faces redundancy or one partner stops working, then these are often key events to trigger them to prioritise in a different way. When this happens they will perhaps forget the reason they bought their policy and decide to let it lapse.
If a policy has been sold in the right way however the financial adviser will have stressed the need for the client to contact them as soon as their situation changes in any way, both in order to make sure that their cover is appropriate for their new needs and to talk through any issues or concerns they might have.
In this way the adviser may be able to alter the cover to meet the new demands in the client’s life, while ensuring that the client is still protected.
Stay in touch
Equally the adviser has an obligation to keep in touch with the client regularly, meeting them at least once a year to review their situation, but it will help if the adviser states at the outset that this is a shared responsibility, that the adviser will keep to routine appointments but that the client should also get in touch if their circumstances change.
Arguably every protection policy should contain a health warning in the same way that a mortgage does on the lines of: ‘your family’s financial well being may be at risk if you do not maintain premium payments on this policy.’
So, how do you keep on top of lapsed policies? Of course if the client doesn’t keep in contact and then misses a payment on their policy, what then? How do you keep on top of who is paying and who isn’t, especially if you’re a volume seller of protection policies?
How easy and quick it is for you to know that a payment has been missed depends a lot on whether you’re an AR or a DA, what network you’re a part of if you’re an AR, and whether you have procedures in place to deal with this in your firm.
A good network should provide their members with all their lapse information in one place with a direct email through to each adviser at least once a month informing them if any of their clients have missed a payment. This information should ideally include:
• The dates and how many premiums have been missed
• What the arrears are
• The commission at risk – if the policy is still in the commission period
• What needs to be done to resurrect the policy and ensure the client remains protected
If you’re directly authorised or you’re not part of a network that provides you with this information then it will be up to the adviser to negotiate what reports they receive and what information the reports contain with every life company they use.
This can be more difficult for DAs who use a wide number of life companies as an AR will typically be restricted to a panel of five or six providers. Once you get an update from each provider, an adviser needs to decipher what they have received and have an action plan about what to do regarding each client.
Every life office’s management information is completely different which can make it very hard for advisers, so it’s essential to have a database or a good CRM system to put the information in, flagging up the action needed and when it needs to be taken.
Ideally managing potential lapses needs to be a dedicated part of someone’s job. Most adviser firms put resource in to manage new and pipeline business, but it is just as important to do the same for business retention.
