Protection Watch with Kevin Carr

Protection Watch with Kevin Carr

5. Oh, what a night! Late December 2012…
Confusion still reigns across the protection industry about just what exactly will happen regarding the ECJ gender ruling (and other legislative changes) which take place at the end of the year. December may seem like an age away, but advisers should already be thinking about how the changes will impact their business – both before and after. In the run-up to December things may get very busy as people try to rush business through before the expected price increases take effect, especially for cases which need underwriting. Afterwards, when prices have gone up, re-broking old business to save money could be a thing of the past, which could impact significantly on a number of business models. As of right now, the industry doesn’t yet know how changes to existing business will be treated and whether or not policies need to have started (or a future start date agreed) but what we do know is that Q4 2012 is likely to be much busier in the protection market than Q1 2013
 

4. Hello! This is the protection industry calling. How you doin?
It has been suggested that the industry needs a ‘Protection awareness day’ to raise interest for both families and advisers – and generally speaking it’s a very good idea. One of the aspects would be an annual protection statement, which isn’t a new idea, however, the proposal that each one should be sent on the same day every year is probably impractical. There are millions of policies in force and as such these should be staggered by either birthday or policy anniversary.
 

3. Code Red – think twice before selling that protection policy
Protection intermediary LifeSearch has warned against the poor industry selling practices of some distributors and the “laissez faire approach to the quality of distribution” by some providers. In a bid to rectify the situation the firm is seeking feedback on a new code of conduct for protection sellers. It is a very well intentioned piece of work that given further dialogue across the industry should raise standards. It is somewhat ironic, however, that despite 25yrs of regulation the proper protection industry, not PPI - that's a GI product (general insurance), should feel the need to effectively regulate itself to ensure better outcomes for consumers.
 

2. Fitter, happier, more productive?
More than a third of people going through Incapacity Benefit reassessment have been found to be fit for work, according to the first set of official statistics. This either means that a bunch of people have suddenly got better, or that the previous tests may have been too easy. Either way, people are realising more than ever before that they can no longer rely on the state as they once did.
 

1. Time for Income Protection to move on
Advisers who know their protection from their rejection know that when it comes to IP ‘own occupation’ policies are the ones to have. The validity of other definitions, such as ‘work tasks’ and ‘activities of daily living’ have been questioned for many years. But the demand for change is gradually becoming stronger with growing calls from intermediaries, industry surveys and declined claim in the media. Offering an own occupation product for everyone could price some people out of the market. However, as somebody once said: I'd rather pay more for something I need, than less for something I don't – and if the policy isn’t going to do the job, it frankly doesn’t matter how cheap it is.
 

This article first appeared in Professional Adviser magazine

Aviva and Ageas helping advisers to talk about protection

Aviva and Ageas helping advisers to talk about protection

Aviva has launched an adviser awareness campaign to help IFAs engage with clients and their families when discussing their protection needs.

Timed in conjunction with the re-launch of the firm’s life cover adverts featuring Paul Whitehouse, the project is aimed at helping advisers overcome barriers when discussing family protection with their clients.

The activity focuses on the positive aspects of family life and encourages advisers to open up conversations around ‘What makes your family special?’ and by switching the emphasis away from protection products towards individual family life Aviva believes advisers will be able to change the way people talk and think about protection insurance.

Louise Colley, head of protection sales and marketing for Aviva said: “Family life is such a compelling topic, it really helps to get consumers engaged - so we’re helping advisers to shift the focus of conversation away from finances and on to families.”

The insurer has also agreed a partnership with childhood bereavement charity Grief Encounter to provide support to all claimants with children.

Meanwhile, new research from Ageas Protect has highlighted that a third of parents don’t know if their existing critical illness policy includes children’s cover.

The provider is now calling for advisers and policyholders to check their existing policies to see if it extends to covering their children, which is an important element of CI cover.

Most advisers will be aware that modern critical illness policies available from the majority of UK protection providers include children’s critical illness cover, while raising the issue provides advisers with the opportunity to inform customers about the value of their existing cover, especially parents.

Both pieces of work are to be welcomed as they give advisers good reasons to talk to their clients about protection – beyond that of merely switching to save money.

How advisers choose to introduce the subject of protection with the clients varies from one to the next, however, with TV advertising, family related questions, positive claims statistics, a falling reliance on state benefits and last but not least rising protection rates on the horizon, there has perhaps never a better time to talk about protection.


Still not writing life policies in trust? Another reason to think again…

I recently heard a story about a single life policy, which was taken out to protect a mortgage, which had paid out when the policyholder sadly passed away.

As the policy was called ‘Mortgage Protection’, which is typical for mortgage related life insurance, his new family expected the money to pay off the mortgage in the house where they were living.

However, as the policy was not written in trust (nor on a ‘life of another’ basis), in the absence of a will, and as he was not yet fully divorced from his ex-wife, the monies went to the ex-wife, in-full, leaving his new partner (and their children) struggling to afford to live in the house.

Many people presume that the main benefit of writing life policies in trust is to avoid potential inheritance tax, but it is also to make sure the monies are paid swiftly, and to the right person, as decided by the life assured.


News

• Bright Grey has added to its simplified products offering with the launch of its Lifestyle Plus plan
• LV= paid 91% of income protection and 88% of critical illness claims in 2011
• Ageas UK has written 89% more protection business in 2011 than it did the year before
• Lloyds Bank is to strip five current and former senior bankers bonuses over their role in the mis-selling of payment protection insurance, according to the Telegraph
• PruProtect has criticised insurers’ use of subject access requests to bypass GP reports when obtaining customers’ medical information
• The government could force people judged too sick or disabled to be employed to do unlimited unpaid work or risk losing their benefits
• Legal & General has made a series of amendments to its group critical illness product including coverage for more illnesses
• Bright Grey has revealed that it has paid out 91% of critical illness claims in the last six months of 2011
• Two more cancer drugs have been provisionally banned for NHS after it was decided they were too expensive for the potential results
• The Protection Review and Income Protection Task Force have produced a list of the top ten things consumers should be aware of when purchasing income protection
• Holloway Friendly Society paid 96.2% of its income protection claims in 2011, up from the previous twelve months 95.5%
• Openwork is launching a mobile app that enables advisers to obtain protection quotes via Apple devices
• Stonebridge Group has added Legal & General to its limited life and protection panel

 

This column first appeared in Mortgage Introducer magazine

Simple products? Nice idea, but cancer isn’t simple

5. Simple products? Nice idea, but cancer isn’t simple
Life insurance is a pretty simple product: You die, it pays out. The illnesses we suffer along the way, however, are not. Over half of all heart attacks in the UK are repeat attacks and diseases such as cancer are far from simple. Many range vastly in terms severity, aggressiveness and in the likely outcomes for the sufferer. As such, simple protection products may never be able to be quite that simple.
VERDICT: Back to the lab

4. Ageas latest to promote children’s CI cover
New research from Ageas Protect shows that a third of parents don’t know if their existing critical illness policy includes children’s cover. The provider is now calling for advisers and policyholders to check their existing policies. Most advisers will be aware that most modern CI policies include children’s critical illness cover, which provides advisers with the opportunity to inform customers about the value of their existing cover, especially parents.
VERDICT: Up

3. Will your life cover pay-out go to the right person?
I recently heard about a single life policy, taken out to protect a mortgage, which had paid out when the policyholder passed away. The policy was called ‘Mortgage Protection’ and so his new family expected the money to pay off the mortgage in the house where they were living. However, as the policy was not written in trust (nor on a ‘life of another’ basis), in the absence of a will, and as he was not yet fully divorced from his ex-wife, the monies went to the ex-wife, leaving his new partner (and their children) struggling to live in the house. Many people presume that the main benefit of writing life policies in trust is to avoid potential inheritance tax, but it is also to make sure the monies are paid to the right person.
VERDICT: Back to the lab

2. Ghosts have a habit of returning
Aviva has launched an adviser awareness campaign to help IFAs engage with clients and their families when discussing their protection needs. Timed in conjunction with the re-launch of the firm’s life cover adverts featuring Paul Whitehouse (who plays a ghost) the project is aimed at helping advisers to focus on the positive aspects of family life by asking ‘What makes your family special?’ and by switching the emphasis away from protection products towards family life Aviva believes advisers will be able to change the way people think about protection.
VERDICT: Up

1. Why December might arrive sooner than we think
In December we can expect to see the impact of a range of tax and legislation changes to hit protection prices. However, with so many changes coming at the same time, it wouldn’t surprise me if the industry thought about moving the goalposts a little. While this may be no bad thing for advisers, awareness of what is to come will be crucial. However advisers choose to introduce the subject of protection with their clients (TV advertising, family related questions, positive claims statistics, a falling reliance on state benefits or the threat of rising protection costs) there has probably never a better time to talk about protection.
VERDICT: Up

Kevin Carr is Chief Executive of the Protection Review and Managing Director of Kevin Carr Consulting.
www.protectionreview.co.uk
www.kevincarrconsulting.co.uk

This column first appeared in Professional Adviser magazine

Mortgage protection: Still a hufe opportunity?

Protection News - NOV 2011

Mortgage protection: Still a huge opportunity?

According to Sainsbury’s Finance four in every ten mortgage holders do not have life cover to protect their mortgage.

The research findings suggest that there are nearly seven million people with a collective outstanding mortgage balance of £245 billion who have no life insurance to cover their mortgage and provide support to their dependents in event of their death.

It can safely be assumed that even fewer people will have some form of critical illness cover or income protection, which for many could be more important than life cover.

While this is nothing new, it does act as a timely reminder. The cost of protection insurance has, generally speaking, been falling for the last twenty years, however, this could change. Factors such as the EU gender ruling, Solvency II and other changes in taxation for life offices could mean that prices start to rise in 2012/13, which could change the protection landscape as we know it.

On the one hand, churning and switching existing business becomes much less likely if rates are going up, which improves persistency (and reduces lapses). Secondly, if rates are going to increase, which is the general expectation, now is a very good time to recommend protection.

But it’s not all about price. It’s about value. My favourite opening question to potential clients was always ‘Would you like the cheapest or the best value?’ and the reason I liked this approach was that the response was typically ‘What’s the difference?’ which is a great way to begin the conversation.

Not all CI policies cover early stage cancers, for example, but I’m willing to bet that most, if not all people, would want this covered. Although it doesn’t stop there, even those who cover early stage cancers will vary. Some require medical treatment where as other may pay out on diagnosis alone.

The way to move away from price is to understand the products, understand the client and match the two together. It is this technical expertise that sets good protection advisers apart and if all products were the same advisers would be little more than a quote engine, which to be frank, is not advice.


The rise and rise of social media

Being an IFA is very much about client relationships – and social media is all about relationships.

Social media sites such as Twitter and Facebook are not replacing face to face, phone or email communication, at least not yet; they are simply a new way of communicating in addition to what already exists.

If Facebook were a country, it would be the World’s third largest. A new member joins Linked-In every second, and more than 140m tweets are being sent around the world every day.

Whilst much of this is non-business related, a growing element, including financial services and the protection industry are using social media successfully because there are many uses for both personal and business use. It's a great way to keep in touch with contacts, media, competitors and quickly broadcast information and opinions across the industry – from the budget or RDR to last night’s TV or football.

Let’s be realistic though. It isn’t going to win new business overnight. It will take a little time and effort and whilst I have little doubt it will positively influence both business and brand the results won’t be instant.

Like most things in life – it isn’t for everyone, and you’ll probably get as much out of it as you put in. But the question isn’t if we embrace social media, it is how well can we do it.


In brief:

• Ageas Protect has launched a new Critical Illness product, which includes 15 ABI+ definitions
• Defaqto has launched a free business protection guide and says provider support is the key to unlocking business protection opportunities for advisers
• PruProtect and PruHealth has launched a range of new Vitality benefits including Thomas Cook, Adidas and Vodaphone
• Aviva UK life and pension sales are up 6% to £8.1 billion
• Friends Life has signed a new long-term agreement with Best Doctors to include its service in the company's new individual protection policies
• Confused.com says 28% of people say they could not afford the funeral if their partner or spouse died
• Royal London life and pensions sales have grown by 12%
• Axa PPP has taken over all underwriting of Permanent Health Company’s private medical insurance (PMI) and dental products
• The National Institute for Health and Clinical Excellence (Nice) has banned another breast cancer drug from routine NHS use
• The Association of Mortgage Intermediaries is asking brokers to send it fictitious payment protection insurance claims they receive from claims firms so it can give them to the Financial Ombudsman Service
• Research by Devon-based Unusual Risks shows that 50 per cent of insurers are now offering some form of HIV life assurance
• Barclays has signed a new deal to distribute Aviva and L&G protection products


Kevin Carr is Chief Executive of Protection Review and MD of Kevin Carr Consulting
 

This article originally appeared in Mortgage Introducer magazine

Nationwide launches alternative PPI product, but how different is it?

Protection News August 2011

Nationwide launches alternative PPI product, but how different is it?

Nationwide building society recently launched its new Lifestyle Protector product which allows customers to set the level of cover they require for accident, sickness and unemployment cover.
The product is underwritten by Pinnacle Insurance and can be used to cover monthly outgoings. Customers can choose a waiting period of 14, 30, 60, 90 or 180 days although cover is only available for six or 12 months with a maximum benefit of £2,500 a month.

While the product includes £30,000 of life cover as standard and offers greater flexibility than some other similar products, it is essentially an ASU product, or a LASU product, if you like, which perhaps sits between traditional PPI products and proper Income Protection plans.

On the plus side, premiums are priced individually and cover is based upon the inability to carry out your own occupation, expressed here as ‘your normal occupation, or any job which you are reasonably able to do given your experience, education or training’. Likewise day one cover is available and while pre-existing conditions and self-inflicted injuries are excluded, which is to be expected, there are no automatic exclusions for muscular problems or mental illnesses, which combined represent around two thirds of all IP claims.  However, as with most general insurance style protection policies the terms and conditions, including the premiums, are reviewable, and cover can be cancelled outright by the insurer, which is not the case with Income Protection.

IP policies, traditionally known as Permanent Health Insurance, can provide cover for a much longer period, typically up until retirement age, with fixed terms and conditions as well as guaranteed premiums, plus added benefits such as rehabilitation and counseling services.
 

The Lifestyle Protector will be offered on an advised basis in Nationwide branches and on the telephone on a non-advised basis, although as with most bank products it is not available through IFAs.


Is it time for a protection hierarchy of needs?

One of the most debated topics amongst protection practitioners in recent weeks has been whether or not we could all benefit from an agreed high level hierarchy of protection needs, and if so what might it look like.
Needless to say there has been a range of views on what the ideal order might be and whether it should be needs or product based, but pretty much everyone so far seems to agree that overall it could be a good idea.
Term life cover outsells Income Protection by around 10 to 1 – largely because it is much cheaper and much easier to sell – and most would agree there has been too much focus on selling cheap life cover. Not just by the industry but consumers as well – they shop around for life cover, but few look for what they really need.
 

So could an agreed hierarchy of needs for protection make a difference? Might it get the message across to a few more people that buying (or selling) £9 pounds per month of life cover on its own probably hasn’t protected the family very well?
 

What might it look like? Here’s one for starters:
 

1. Income Protection (specifically own occupation)
2. Critical Illness Cover (including life cover and cover for early stage cancers)
3. Life Cover (Term and Whole of Life, depending on the circumstances)
4. PMI (Private Medical Insurance)
5. All others (including other versions of the above)
 

We would need to get the message across via consumer groups, websites and the media. It would need to be very simple while making some basic assumptions, such as no existing cover, good health and a realistic level of budget.

But what do you think?
 

Round-up

• A new online protection distributor ‘The Life Dept’ has launched in a multi-tie with Ageas Protect, PruProtect and L&G
• Friends Life has split the business to differentiate between open and closed business
• Ageas Protect has launched a guaranteed life cover product through supermarket chain ASDA
• LV= paid out 93% of CI and IP claims for the 12 months to June 2011 with a total of nearly £9 million paid out in CI claims, and over £12 million in IP claims
• Direct Line has pulled out of the life insurance market
• Iain Clark has been appointed Managing Director for Protection at LV=
• The first two Protection Review and PFS independent protection training dates were fully booked with a week
• The Financial Ombudsman Service are receiving 900 PPI complaints a day
• The total number of unemployed people increased by 38,000 in the three months to June to reach 2.49 million
• Bright Grey has paid 90% of all critical illness claims in the first six months of the year
 

Kevin Carr is Chief Executive of Protection Review and MD of Kevin Carr Consulting

This article first appeared in Mortgage Introducer magazine

Should advisers charge for helping with protection claims?

Protection News
JUNE 2011

Should advisers charge for helping with protection claims?

An interesting debate has been taking place in recent weeks about whether or not advisers in a post-RDR world would, or even should, charge for time spent in dealing with their client’s protection claims.

As intermediary Peter Chadborn of Plan Money recently pointed out, many of us in the protection industry feel that the RDR adviser charging debate probably doesn’t apply because commission will remain, yet anyone selling protection products alongside other regulated products could be affected differently.

Most protection advisers who operate quite fairly on a commission basis wouldn’t think twice about helping their client through the claims process, without even considering any additional charging. However, those who seek to operate a ‘fee-only’ service may find themselves with an interesting dilemma:

Client: ‘Hello Mr Adviser, my wife has just been diagnosed with cancer. I seem to remember you convinced me to take some critical illness cover, what do we do next?’

Adviser: ‘That will be £200 an hour please.’

Is that really the world we would welcome, or should claims be left purely in the hands of the life office?

We all know life office administration can be poor – I once saw a claim acknowledged 6 weeks later on a handwritten compliment slip – and poor service reflects badly on the adviser too.

Peter Chadborn agrees: “Unless you have experienced the traumatic phone call from a client with the heart-sinking news that they or their partner have been diagnosed with something horrendous then I won’t begin to try and explain how it feels because I will not do the sentiments justice. How can we put a price on the assistance we provide at times like this?”

Then there is the issue of declined claims. I know several advisers who make it part of their service not only to manage claims, but to fight decisions as well.

No doubt some advisers would be happy to leave the claim in the hands of the life office, and yet jump back in when it comes to investing the lump sum, which might just be considered to be double standards.

Personally, I doubt if any serious protection adviser would ever leave their client purely at the hands of the life office during such a traumatic time. If and how they charge for their time is another matter, but it is yet another valid reason to maintain commission within the protection industry.

Should we embrace the new Money Advice Service?

Now that the adverts are running a number of leading figures within the protection industry have called for advisers to engage with the Money Advice Service (MAS) rather than fear it.

The ABI, reinsurer RGA and leading intermediaries such as LifeSearch have urged the market to take a proactive approach by contacting the service to raise any queries and to build on information offered by it to increase sales.

The service promotes independent, unbiased advice, which has caused concern amongst some advisers, with a few challenging the use of the word ‘advice’. However, it should be understood that MAS exists to provide very generic and unpersonalised guidance, such as ‘You should think about what to do about your income in retirement’ or similarly ‘You should think about how your family would cope if you were too ill to work’, as opposed to recommending any specific products, which is where advisers can add value.

Speaking at RGA's Write the future conference, Nick Kirwan, assistant director of health and protection at the ABI, suggested advisers could ‘capture’ customers after they had been through the information process:

"As an industry we should make sure we're ready to catch people coming out of that process as they're left being told ‘You should be considering some life insurance' but not being told how much and what to do next.

His comments were echoed by David Gulland, managing director of global reinsurer RGA, who advised the market to respond to the initiative and recommend any corrections.

News in brief

• The Association of British Insurers has published guidance terms for insurers in order to reduce the time taken to pay life insurance claims
• Ageas Protect is calling on protection providers to label their products according to the percentage of life cover, critical-illness and income protection elements included
• Brits are twice more likely to insure their pets or mobile phones than their income, according to research from Scottish Widows
• Lloyds Banking Group is preparing to axe 15,000 jobs as part of a £1bn cost saving plan, according to The Sunday Times
• Barclays has promised to repay all PPI complaints in full
• The average sum assured taken out by the gay community has increased by over £10,000 since last year according to research from Compass Mortgage & Insurance Services
• The number of dads holding income protection has fallen by 5% in two years, according to results from Legal & General
• More than half of those with life cover fail to upgrade after significant changes in their circumstances, according to Sainsbury’s Life Insurance


Kevin Carr is Chief Executive of Protection Review and MD of Kevin Carr Consulting
 

This article was first published in Mortgage Introducer magazine

The latest protection news

Protection News
MAY 2011

Could Income Protection replace PPI?

Speaking at a conference in London market analyst Defaqto has said it believes short term income protection (STIP) products could become the replacement for payment protection insurance (PPI).

At the Protect trade body meeting, Ben Heffer, market analyst at Defaqto, revealed that insurers and distributors had jumped ship from most PPI products, with a growth in short term IP taking place.

"The point of sale prohibition for PPI could be an impetus to create a standalone market for these short term IP products, to cover not only payments but people's life expenses too."

In 2009 there were around 20 short term IP products available, and according to Defaqto, that number has already doubled, while at the same time the number of PPI products has reduced significantly.

Heffer also feels the ‘PPI’ brand is now so damaged that change is necessary.

"PPI is a toxic name, a toxic brand and we definitely need a new name for this. Short term IP appears to be where is this going, but unfortunately that probably confuses and blurs the lines between short term IP and long term IP.”

There has been a lack of innovation in the PPI market over the last year or so, which has probably been driven by growing concerns from distributors about the future of the product based on the Competition Commission ruling. Many distributors and probably providers alike have taken a ‘wait and see’ stance until legislation is finalised.

Compared to proper Income Protection PPI is often a very poor value for money product for most consumers. Guaranteed rates, fixed terms and conditions, own occupation cover, no automatic exclusions, claim payments until retirement and so on were, and still are, very strong arguments in the defence of IP over PPI.

So the opportunity for something that sits in the middle between PPI and long term IP is clearly the future.

Heffer also added a warning that the continued price cutting trend could harm the industry and its reputation with consumers.

"The down pressure on price should be a concern to all of us. If cheaper products mean poorer products, that's bad for the consumer."


More protection providers to develop online trust forms?

Protection intermediary LifeSearch has called for more protection providers to follow the example set by Friends Life and Ageas Protect in allowing life policies to be written in trust electronically.

Matt Morris, senior policy adviser at the firm, says it is vital that intermediaries discuss the benefits of writing a policy in trust with customers whenever it is relevant and argues that more providers should facilitate the process online to make it easier and quicker.

“The industry recognises that not enough consumers put their policies into trust, yet the process is cumbersome for the adviser,” he said. “At LifeSearch we’ve gone to the lengths of setting up a specialist team but most IFAs won’t be able to do this. We want to see all providers making the process easier with a quick and simple online system. Friends Life and Ageas do it so there’s no reason why the rest can’t.”

Online trust options can save both time and money for intermediaries as well as ensuring more policies are written under trust, which has various benefits for the consumer including speeding up the payment in the event of a claim and potentially avoiding unnecessary inheritance tax. More importantly, it’s often the right thing to do for many clients, including mortgage related protection.

Ageas recently saw a 60% increase in the number of policies written in trust through the new online facility after feedback from IFAs confirmed that many of them, as well as customers, are put off writing policies in trust because of the laborious and complex paperwork that is typically required.


Round up

• Aviva has developed a new short-term Income Protection policy aimed at competing in the PPI market
• A new specialist protection intermediary Life Cover for All has launched to help people with pre-existing medical conditions find cover
• Dame Carol Black has been confirmed as the after dinner speaker at this year’s Protection Review conference
• Friends Life total new business rose 52% in Q1 compared to a year earlier
• Cirencester friendly has increased both premium income and membership in the last year with the friendly society growing net earned premiums by 6.6% to £12.1m in 2010 with membership growing by 5%
• More than half a million people are claiming incapacity benefit (IB) or employment support allowance (ESA) for depression, according to figures released by the Government
• Royal London's members have approved the acquisition of Royal Liver's closed book of protection business

Kevin Carr is Chief Executive of Protection Review and MD of Kevin Carr Consulting

 

This column first appeared in Mortgage Introducer

New product launches? VERDICT: UP

Protection Watch with Kevin Carr


5. New product launches
VERDICT: UP

This month has seen new protection product launches from British Friendly and PruProtect. British Friendly launched a new intermediated Income Protection plan offering both short term and long term protection, while the new products from Pru included Family Income Cover, Whole of Life and forward thinking Education Cover, which is designed to cover all potential costs associated with a child’s future education. In a time of mergers and closures, it’s encouraging to see something new.

4. Property remains the top protection trigger
VERDICT: UP

According to new research from Scottish Provident purchasing a property remains the main reason why clients take out protection, with over nine in ten IFAs considering it a major reason. Given mortgages remain the key protection driver it is no surprise that sales of individual protection products are roughly half what they were around 5-10 years ago, before the mortgage market and wider economy suffered. However, despite this fall in sales, around 1m people a year still buy basic life insurance in the UK, and the rates available for most people continue to fall.

3. Supporting non-advised business
VERDICT: DOWN

For many years like minded colleagues and I have challenged the role that non-advisers play in the protection market. I think the debate has moved on from the somewhat oversimplified ‘right or wrong’ approach and many would agree there is room for both. However, whichever model a distributor chooses must be sustainable and robust – as should the processes for supporting such models from the provider side. If something looks too good to be true, it probably is.

2. LifeSearch Awards
VERDICT: UP

Congrats once again to my old muckers on City Road. This year’s awards lunch was a thoroughly splendid event featuring well deserved award winners and a smattering of the great and the good from across the protection profession. The big winners on the day included Ageas and PruProtect, who both walked off with three gongs each, while Axa took two. It was also lovely to see Liverpool Victoria’s Linda Winder collect the marketing and comms award after beginning her PR career with the firm in the noughties.

1. Can we be positive about the recent gender ruling on insurance?
VERDICT: DOWN

The European Court of Justice has ruled that policies written on the basis of gender constitute discrimination and that we until the end of 2012 to adapt. Most of the initial reaction has been negative with television news reports and the national press queuing up to ridicule this latest example of European interference in our affairs. However, some positive views are already emerging and the removal of gender could drive innovative and forward thinking underwriting changes with potentially greater use of occupation, lifestyle, post code and more in the years to come.

That said, while the industry could turn the gender ruling to its advantage, the question of where the line will be drawn remains a threat as there is another directive in the pipeline relating to age and disability. If a similar outcome is reached we will see much greater chaos across the financial services industry, chaos that could change the industry as we know it forever.

Kevin Carr is Chief Executive of the Protection Review and Managing Director of Kevin Carr Consulting.
www.protectionreview.co.uk
www.kevincarrconsulting.co.uk

 

This article was first published by Professional Adviser magazine.

Two in five families significantly affected by illness

Protection News
FEB 2011

Two in five families significantly affected by illness

More than two in five (42%) UK families have been significantly affected by illness, with 25% of those having had one of the main breadwinners unable to work due to illness, according to new research from Aviva.

A further 15% had experienced a family member being off work due to stress, depression or mental health issues, while 7% had a family member who had to give up work to care for a close relative.

Yet, when it came to financial protection against such events, just 7% felt their families were fully protected, while just 11% had any income protection.

The full results can be found in The Aviva Family Finances Report, which was published in January and coincides with the firm’s national TV advertising campaign mentioned here last month.

We’ve all similar statistics over the years, but these days we also know that paid claim rates across the board are averaging in excess of 90%. So what is the barrier? There is a clear need for protection insurance, the state is providing less and less, products are generally less expensive than before, and a higher proportion of claims are being paid than ever before.

When the mortgage market picks up protection sales must follow suit.


Is ‘low-start’ the new future of protection?

Ageas Protect has launched a life and critical illness product which provides cover at a lower initial cost that rises over time.

The protection provider, formerly known as Fortis Life, rebranded earlier this year and is keen to make a mark on the mortgage protection market with this new product, especially with first time buyers.

Low Start customers can buy the level of cover they need at a lower premium, which gradually increases at a guaranteed rate for the period of the cover. For a 35 year old male non-smoker taking out £150,000 of cover over a 15 year term, Low Start Term Assurance would cost an initial premium of £6.83 per month compared to the YourLife Plan premium of £10.17. Low Start Critical Illness with Term Assurance would cost £22.50 per month initially in comparison to the YourLife Plan premium of £35.11.

Anything that helps drive customers towards buying the cover they need should be welcomed, and I wouldn’t be surprised if we see more protection products of this kind in the future.


News in brief

• Financial Secretary to the Treasury, Mark Hoban, says Income Protection should be one of the first Simple Financial Products (SFPs) made available to consumers
• Zurich UK Life reported that 91% of all critical illness claims received in 2010 were paid
• Aviva is building on the success of the IPTF Income Protection roadshows by announcing a number of their own events in the coming months
• LifeSearch has announced the shortlists for its annual Protection Awards with Ageas, Axa and PruProtect leading the way
• Scottish Provident’s critical illness plan has been awarded a 5-star rating by Defaqto for the seventh year running
• Reinsurer RGA has added Mark Johnson as business development manager to its marketing team
• According to Legal & General the UK business protection gap remains at £1.1 trillion
• LV= has appointed Iain Clark, formerly of Legal & General and PruProtect, as Director of Protection
• Andy Briggs is to replace Trevor Matthews as Friends Provident Chief Executive

Kevin Carr is Chief Executive of Protection Review and MD of Kevin Carr Consulting

This article first appeared in Mortgage Introducer magazine

5. Total Premium Disclosure... VERDICT: DOWN

Protection Watch with Kevin Carr


5. Total Premium Disclosure
VERDICT: DOWN
Intermediaries may have noticed a subtle change to protection quotes recently, where the total premium over the term has been added to the quote, as well as the monthly premium. It is here to stay so trying to be positive we could quote the total premium first, before breaking it down: Should you keep this for the full 25yrs Mr Client the total premium would be £7,500, which works out at just £25 per month. And, as monthly premiums across providers are often similar it can be difficult to show a justifiable saving, but if we compared quotes by the total premium, where relevant, advisers could demonstrate the value: £25pm is £7,500 over a 25yr term – but £28pm is an extra £900 which sounds like much more than £3.

4. IFAs say protection products are essential part of financial planning
VERDICT: UP

According to research from Scottish Provident 19 in every 20 IFAs believe protection is important for their customers. The survey, which questioned IFAs on their views of protection products and how they are perceived by consumers, found life assurance (48%) was listed as the most essential cover if consumers could only take out one product. This was followed by income protection (36%), critical illness cover (16%) and finally unemployment benefit. However, given that death is the least likely of these events, which is why life insurance is cheaper; shouldn’t these priorities be in a different order?

3. PFS & Protection Review training initiative taking shape
VERDICT: UP
The structure, content and format of the training is taking shape and pilot dates should be announced soon. We have been working with several potential IFA co-presenters and independent underwriting presenters as well as an outsourced professional trainer. The format will be in half day sessions in three parts: 1. Products, providers, market overview and trends. 2. Technical product details and 3. Advice, sales and overcoming objections. Areas such as ICOBS regulation and TPD updates will also be included.

2. IFA to launch in-depth new website for critical illness cover
VERDICT: UP

Highclere Financial Services partner Alan Lakey is to launch a new critical illness cover website which compares the cover available from different providers. The award winning intermediary has been working on the site for more than two years and says the driving factor is to move the market away from selling cover on price alone: “Most advisers sell CI on cost and that simply is not good enough. Either advisers are lacking in competence or, far more likely, they are lacking in knowledge.”

1. Aviva launches new life insurance TV campaign
VERDICT: UP

Aviva has launched a national TV advertising campaign to highlight the importance of taking out life insurance, which will be on our screens from January. The thought provoking advert, part of the series featuring former Fast Show comedian Paul Whitehouse, highlights how he has peace of mind, knowing his family has financial security without him around. Whether or not we believe life insurance is bought or sold, the protection industry needs promoting and along with others who have done so in recent years Aviva should be applauded for their efforts.


Kevin Carr is Chief Executive of the Protection Review and Managing Director of Kevin Carr Consulting.

www.protectionreview.co.uk
www.kevincarrconsulting.co.uk

 

This article was first published by IFAonline.

Protection News - Aviva promotes life insurance in major TV campaign

Protection News - Aviva promotes life insurance in major TV campaign
JAN 2011


Aviva has launched a national TV advertising campaign to highlight the importance of taking out life insurance, which will be on our screens from January.
The thought provoking advert, part of the series featuring former Fast Show comedian Paul Whitehouse, highlights how he has peace of mind, knowing his family has financial security without him around.
Whether or not we believe life insurance is bought or sold, the protection industry needs promoting and along with others who have done so in recent years Aviva should be applauded for their efforts.
According to their research 39% of UK adults have no form of protection, while a further 17% of UK adults only have enough protection to cover their mortgage. They also state that every half hour a child in the UK is bereaved of a parent, with around 480,000 children under the age of 18 in Britain having experienced the death of a parent or sibling.
Aviva says it has made the decision to drive awareness amongst consumers and to help advisers with a powerful reason to talk about protection to both existing and new customers. Hopefully some people will pro-actively get in touch with their adviser too as Aviva’s research also shows that consumers value IFAs as a source of advice, more than friends or family.
Aviva also says it is committed to raising awareness of the need to adequately protect the family and aims to be the leading provider in this market.
Many of us within the industry feel that a generic advertising campaign to remind people about protection is exactly what the market needs. The adverts, which could run again later in the year, will also promote the use of a financial adviser, all of which is to be commended.




IFA to launch in-depth new website for critical illness cover


Highclere Financial Services partner Alan Lakey is to launch a new critical illness cover website which compares the cover available from different providers.


The award winning intermediary has been working on the site for more than two years and says the driving factor is to move the market away from selling cover on price alone: “Most advisers sell CI on cost and that simply is not good enough. Either advisers are lacking in competence or, far more likely, they are lacking in knowledge.”


The site will be in two parts, with one part for consumers and one for advisers. The consumer section will explain CI and why it is important and will promote the need for independent advice.
The adviser section will feature comparative product tables from all CI providers. The tables will be based upon Lakey’s own in-depth analysis of the market where individual providers are ranked on the likelihood of cover paying out for each condition.


Adviser subscription will be £20 a month, which will include access to the site and updates when changes to cover are made.
 

News in brief

· Legal & General has improved its critical illness cover product including extending cover to age 70
· Fortis Life has now rebranded to Ageas Protect
· Phil Jeynes has joined PruProtect as Head of Account Development
· Assurant launches ASU underwritten at point of sale
· This year’s Protection Review conference and dinner will be held on June 23rd in London
· Legal & General has improved its medical underwriting limits for Income Protection


This article was first published by Mortgage Introducer.


Kevin Carr is Chief Executive of the Protection Review and MD of Kevin Carr Consulting


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Kevin Carr is Chief Executive of the Protection Review and MD of Kevin Carr Consulting

So the powers that be who rule us from afar are back once again with the Equality act...

Mortgage Introducer – Protection News
October 2010

When good intentions backfire

So the powers that be who rule us from afar are back once again with the Equality act, perhaps a generally sensible piece of legislation, but one which carries far-reaching and quite possibly rather anti-consumer outcomes.

Where to start? Reportedly employers will no longer be able to ask questions about a potential employee’s health, which means they won’t know how many days off sick you may have had, whether or not you suffer from a bad back or if you’ve spent 6 months in counselling or even rehab for that matter.

Whilst this arguably makes the workplace a fairer place to be, the impact on group insurance, where employees of a company are covered under the same scheme, could be quite negative. The company’s workforce, by default, will overtime include people who are more likely to claim on benefits such as Income Protection, which can only force prices up. But in the present economic climate employers are struggling to afford the current benefits, let alone pay more, so the likely outcome is that benefits will be reduced across the board, including the existing healthy workforce.

Moving closer to home with the individual market, sexual discrimination has been the buzz word in recent weeks. The likes of Sheila’s Wheels could soon be a thing of the past when insurers are forced to charge the same insurance rates for both men and women. While again this is arguably the fair and right thing to do, the implications in the world of insurance are unlikely to benefit anybody. Taking life cover as an example, female rates are generally cheaper (the girls on average live longer than the boys) so the cost of life cover for females would increase to match that of men.
The big question is whether or not the price would fall for males? If it did, it would likely only be by a small amount, if all at. This is mainly because of the cost to the industry of re-pricing millions of variables as a result of the new legislation.
 

Good intentions perhaps, but very possibly with unintended consequences.
 

In trusts we must trust

Fortis Life recently revealed a significant increase in the number of protection policies being written in trust through its online process.

While they weren’t specific about the numbers, they said the amount had ‘more than doubled’ over the last four months in comparison with the previous four months.

When it comes to the use of trusts, it’s a pretty open and shut case: There is a strong argument that almost every life insurance policy should be written in trust (if not ‘life of another’ of course).

Without getting too technical, a trust is just an A4 piece of paper that requires a few signatures. Ok, it’s a little bit more complicated than that, or at least it used to be, but even mortgage business should be considered, especially if there is likely to be any monies left over after paying off the mortgage (even if the policy has been assigned).

Using trusts speeds up the payment of a claim, makes sure the monies are paid to the right person, and sometimes, most importantly of all, can avoid unnecessary inheritance tax. After all, there’s not much point in saving 50p a month on your life cover if 40% of the payout goes to The Treasury.

The online trust process has been developed to make life easier for advisers and responds to feedback that writing covers in trust was beneficial to customers, but often made too confusing and difficult. Other providers offer online trust services and policies tend to stay on the books longer when written in trust.


News in brief

• LV= is offering a 5% income protection discount for the rest of 2010
• According to Scottish Provident Almost four million Britons have less than six months worth of emergency financial provisions
• Bupa Health Assurance is to be bought by Resolution subsidiary Friends Provident Holdings
• The FSA is set to challenge the British Bankers' Association's judicial review of its new PPI complaints handling measures
• Royal Liver has closed its IFA protection arm to new business with immediate effect
• Canada Life has launched a new group critical illness policy
• Friends Provident has enhanced its critical illness cover with the addition of mastectomy cover and five ABI+ conditions

Kevin Carr is Chief Executive of the Protection Review and MD of Kevin Carr Consulting

This article first appeared in Mortgage Introducer magazine.

Is it right to load protection premiums in return for more commission?

Mortgage Introducer – Protection News
September 2010


Is it right to load protection premiums in return for more commission?

This has been perhaps the hottest topic in protection circles in recent weeks. The debate, which has divided opinion across the industry, is that some distributors may charge a higher ‘loaded’ premium and receive more commission as a result. Such premium ‘loadings’ are not those linked to the customer in any way, such as their health, but simply a higher rate set than the standard proposition, which is reflected in higher commission terms being paid.

It isn’t new. Many companies will look to negotiate higher commission rates based upon factors such as the quality and quantity of business being written. On the one hand there has been dual pricing in the mortgage market and further afield supermarkets and other retailers can charge different prices for the same goods so why shouldn’t IFAs? On the other hand, is it fair and if not where do we draw the line?

Whatever price is charged to the consumer, and no matter how it is charged, it must be justified, but arguing for more commission when it doesn’t increase the premium the customer pays is one thing – deliberately trying to sell the same product at a higher premium in return for extra commission is another.

Alan Lakey, partner at Highclere Financial Services said: “Current commission rates on protection are quite adequate. I have no problem negotiating on the basis of volume business, which I am sure lots of big networks do on a regular basis, but what I object to is when this is extended to asking for so much money that the only recourse left to the company is to increase premiums to clients. I cannot see any justification for that.”

Some advisers may feel their overall advice and service warrants a higher fee – not all intermediaries charge the same hourly rate, for example. In fact, in the case of the supermarkets, they may or may not offer cheaper premiums, but the chances are they will receive more commission than the average IFA, despite selling on a non-advised basis.

Whatever the outcome it wouldn’t surprise the industry if having confirmed that commission will stay in the protection world, FSA reviewed the rules around protection remuneration and put a few boundaries in place for the future.


Are more intermediaries turning to protection?

A recent survey by the PFS and Protection Review found that 5.9% of PFS member’s current business now relates purely to long-term protection. On first glance this may seem quite low, however, it compares to just 0.4% and 0.8% in previous years, which represents quite an astonishing increase in a relatively short space of time.

Many within the industry hold the view that protection is a valuable business area in its own right and is more than just an ‘add-on’ to other sales such as mortgages and savings with firms such as LifeSearch employing around 80 independent pure-protection advisers.

The increase may of course also be linked to commission as well falling prices, but at the end of the day, and most importantly, we still have a hugely underinsured population – especially when it comes to those with families and significant debts.


News in brief

• Defaqto says that one third of new debts do not have life cover
• Scottish Widows has paid out £240m in the last ten years on critical illness cover claims
• Just 4% of employees would approach their boss with a health concern according to Aviva
• Zurich has enhanced its underwriting for mortgage and family protection business by scrapping doctor’s reports for under 35s applying for under £1m of cover
• Bright Grey paid 95% of critical illness claims in the first six months of the year with an average pay out of £90,000
• Bupa is offering a free health check with new Income Protection sales
• Royal London reports £2m loss and says new protection business continues to be hard hit by the downturn in the property market
• Blu Debt Management has teamed up with Paymentshield to staget 18 joint seminars for mortgage advisers and IFAs across the country

Kevin Carr is Chief Executive of the Protection Review and MD of Kevin Carr Consulting
 

This article first appeared in Mortgage Introducer magazine.

News from the annual Protection Review conference

Mortgage Introducer – Protection News
August 2010

NEWS FROM THE ANNUAL PROTECTION REVIEW CONFERENCE

Protection premiums could rise by 10% in 2012

Protection premiums could rise by up to 10 per cent if HM Revenue & Customs proceeds with its proposed changes to the way protection products are taxed.

Speaking at the recent Protection Review conference in London, Grant Thornton senior actuarial consultant Nigel Cooke predicted the tax implications could force insurers to raise their premiums.

Cooke said: “If HMRC quite logically decides that pure protection should not be within the basic life insurance tax regime, it probably means that for a large number of insurance writers those premiums will rise by 5 to 10 per cent, before anybody adds insurance premium tax to that.”

“The Government would be making it more difficult and unattractive for people to protect themselves, which I do not think is what they want.”

The move would impact on life policies, including those which combine critical illness cover with life insurance, but not stand alone CI or income protection products.

As a result some experts now predict a fire sale in the protection market, while others have begun to question the non-advised sales model, which relies heavily on falling prices. If prices are pushed up by 5-10% the market could see a reduction in new sales as fewer people would be able to switch their cover to save money.

RDR only just survived

The FSA considered scrapping the retail distribution review at a board meeting in March this year but decided to continue with plans for fear of “losing face”, according to a key-note speaker at the recent Protection Review conference.

Lansons director of regulatory consulting Richard Hobbs, said the FSA came close to scrapping the RDR as recently as four months ago and claimed the regulator is “not particularly proud” of it.

Hobbs told delegates that he expected the RDR to continue, despite rumours to the contrary, after it was announced the FSA would be replaced by a prudential regulatory body at the Bank of England and a new Consumer Protection and Markets Authority.

He said: “As for the RDR, I guess that will continue to completion. There are a great many rumours around the market that the RDR is to be pulled - I think that is completely untrue. I might have to eat my words but my view is it will carry on.

“I have to say, it only just survived an executive committee meeting in March at the FSA. The FSA are not particularly proud of the RDR but it is a question of losing face, so I think they will carry on.”

An FSA board meeting was held on March 25 - one day before it published its RDR policy statement.


2010 Consumer research highlights, in association with Hannover Life Re (UK):

• 26% of people fear the NHS will decline post-election
• People overestimate the amount of cover they hold – just 37% feel their protection cover is insufficient
• Lower socio-economic groups still have the greatest interest in protecting their family and lifestyle
• 31% of people with mortgages hadn’t thought about buying life cover
• Younger generations are worried about funding parents’ long term care (27%)
• Overall levels of trust are not diminishing (76% expressed a level of trust, 3% higher than last year)
• 34% feel they could not survive financially for longer than four months

2010 Industry research highlights, in association with the Personal Finance Society and Fineos:

• 52% said RDR will result in more advisers specialising in protection
• Significant increase in respondents focused totally on protection (up from 0.8% in 2009 to 5.9%)
• 37.5% of those surveyed expected to write more protection in the next 12 months
• Advisers are divided on the impact of technology but around a third have significant expectations of it
• Better and faster service (82%) matters more than marketing support (60%) and technical training (52%)
• Price (46%) narrowly beats good adviser communication (39%) and innovation in design (32%) as the key element in a new product

2010 Award Winners

• Innovation Award in association with Gen Re
WINNER: Exeter Friendly

• Online user experience effectiveness award in association with Space01
WINNER: Bupa

• Individual Protection Adviser of the Year in association with PruProtect
WINNER: Roy McLoughlin, Master Adviser

• Organisation of the Year in association with RGA
WINNER: GRiD (Katharine Moxham)

• Protection Journalist of the Year in association with Fortis Life
WINNER: Madeleine Davies, Health Insurance

• Underwriter of the Year in association with Risk Assured
WINNER: Zurich

• Protection Intermediary of the Year in association with PruProtect
WINNER: Direct Life & Pensions Services

• Personality of the Year in association with Exeter Friendly
WINNER: Neil McCarthy, Direct Life & Pension Services

• Outstanding Contribution to Protection Journalism in association with Friends Provident
WINNER: Jeff Prestridge, Mail on Sunday

• Lifetime Achievement Award in association with Swiss Re
WINNER: John Joseph



Kevin Carr is Chief Executive of the Protection Review and MD of Kevin Carr Consulting

This article first appeared in Mortgage Introducer magazine.

More more more CI claims being paid, plus Battle Royale: ABI+ Definitions

Protection Watch with Kevin Carr


5. More More More CI claims being paid
VERDICT: UP

It was roughly six years ago when LifeSearch began the campaign calling for insurers to publish their paid and declined CI claim stats. Despite some hostile criticism at the time (against a backdrop of overwhelming support from consumer groups and the media) I’m very pleased to see companies not only still publishing the stats but reporting ever improving pay out rates as well. I don’t think we’ll ever quite get to 100% (and arguably shouldn’t ) but there’s no reason why the industry cannot and will not rise to 95% in the coming years. The next step – if there is one – is to include information on partial payouts as well. There won’t have been too many yet, but there will be many more in the future.

4. Battle Royale: ABI+ Definitions
VERDICT: UP

Defaqto says the Critical Illness Cover ‘illness race’ has moved on from companies merely adding new conditions and is now about companies offering improved definitions i.e. definitions which are better than the ABI minimum standard, known as ‘ABI+’. I’ve always said that if all else was the same (which in truth it rarely is) that the longer the list of conditions the better – or perhaps it is better put this way: I’d rather have it on the list than not on the list, even if I’ve never heard of it. And the ABI+ race is no different. When it comes to my own cover, I’d rather have better definitions. Who wouldn’t? I’d also rather have claims paid earlier. Who wouldn’t.

3. Dr No?
VERDICT: UP

Zurich has scrapped Doctor’s reports when underwriting applicants aged under 35 applying for less than £1m of life cover. Doctor’s reports add delays and cost money. Tele-underwriting is a great improvement for some, but it isn’t the only one. The more the industry can do to simplify the buying process the better. Well, probably. The easier something is to buy the more people will switch around.

2. We’re gonna get loaded
VERDICT: DOWN

This has been perhaps the hottest topic in protection circles in recent weeks. The debate is that some distributors charge a higher ‘loaded’ premium and receive more commission as a result. It’s not new but it has divided opinion in the industry. On the one hand supermarkets and other retailers can charge different prices for the same goods so why can’t IFAs. On the other hand is it TCF? The only point worth adding to the debate is that whatever price is charged, and no matter how it is charged, it must be justified. And it wouldn’t surprise me if having confirmed that commission will stay in the protection world, FSA reviewed the rules and set up some boundaries going forward.

1. Moving on up: More intermediaries selling protection
VERDICT: UP

A recent survey by the PFS and Protection Review found that 5.9% of PFS member’s current business now relates purely to long-term protection compared to just 0.4% and 0.8% in previous years. This is a significant increase, which perhaps reflects the view that protection is a valuable business area in its own right and more than just an ‘add-on’ to other sales. The increase may also be linked to commission and falling prices but most importantly we have a hugely underinsured population.


Kevin Carr is Chief Executive of the Protection Review and Managing Director of Kevin Carr Consulting.
www.protectionreview.co.uk
www.kevincarrconsulting.co.uk

 

© Article reproduced by kind permission of IFAonline

Protection Review chief executive Kevin Carr asks whether our love of animals could help the protection market?

 

Those of you, who know me well, may well know that we recently acquired a cat.  I say acquired as it wasn’t something we planned on.

In fact I had no desire to own a pet at all. The last time I had one was when I lived in a pub in Ipswich as a child. We had a crossbreed Labrador called Lee who kept my feet warm at night and inebriated customers at bay at all other times. This was circa 1981. I was six, the Orwell Bridge was being built just up the road and Bobby Robson’s team won the UEFA cup with talented greats such as Brazil, Butcher and Mariner. The builders were partial to a pint or nine so keeping them all in check was no mean feat, although we soon moved to Essex and took the dog to a home. He just couldn’t cope with the smaller house compared to the huge grounds of a pub with three bars.

Then this year I saw a young cat sitting on our window ledge, looking rather cool in the snow. I’d never seen it before so I took a picture. About a week later a neighbour asked if we realised it kept going in and out of our outdoor cupboard.  We searched around online, drove through local streets looking for posters and checked with the local vet if it had been micro-chipped. Only then did we realise the cat had been dumped after Christmas and was ‘living’ with us, albeit without us knowing.

Once it became clear that no one would take her in the cat was well and truly acquired. The little nine month old tortoiseshell cat mixed with streaks of ginger and patches of white became known as ‘mixie’ (on the basis that she has lots of mixed colours and patterns) and being responsible new parents we thought we better buy some pet insurance. Well, the nice vet recommended it of course.

Good people those pet insurance advisers we call vets, actually. I’m sure they’ve never heard of ICOBS and they certainly didn’t issue a statement of demands and needs, but they quickly pointed out a few pitfalls about pet insurance that we found very handy – because buying pet insurance is not simple. A bit like protection. I didn’t know, for example, that you can buy short term insurance, which has those nasty PPI-like PECs (pre-existing condition) exclusions or long term insurance where any new problems are covered for much longer. A bit like income protection.

The Which? website in particular was very helpful and a few hours later our cat was insured.  Was the cheapest the best? No, of course not. Far from it. A bit like protection, it took a few hours to try and decode all of the options and terminology.

All of which got me thinking. Might some people be more likely to buy protection if it covered their pets as well? I’m sure this has been said before but could there be (is there one already?) an umbrella policy that covers humans and pets living under the same roof with one overall sum assured?

I reckon this might just work and a quick straw poll of people over the recent Easter weekend, mostly younger than I, came in at seven yes’s and one maybe.  No doubt there will be good reasons to dismiss the idea – there always are – the policy documents might be a bit long, IFAs might not want to talk about pet insurance, the quote might be a little confusing... But, if it drove demand for more protection these issues can be overcome.

They always can.

So if you’ve got this far without falling asleep that’s cool because talking of falling, some of you may have heard a rumour that I recently damaged my foot whilst iceskating.  The truth is that I fell off our garden fence while saving our little lost cat from the nasty car park next door where she seemed to be stuck. Not very cool at all really.

No doubt she wasn’t lost at all. But then why let the facts get in the way of a good story.

 

Kevin Carr is chief executive of Protection Review

This article first appeared in the Protection Review’s monthly e-PR publication (May 2010)

Just last week I wrote in these very pages that the UK protection industry might, just might...

 

Just last week I wrote in these very pages that the UK protection industry might, just might, soon end up with just a handful of serious product providers in the market.

With the news Aegon is considering pulling out of the market we could face a situation where seven becomes two - and that may not be the end of it.

With Friends Provident and Axa (and Aegon?) falling under Resolution's wing, and Scottish Provident, Bright Grey, Royal Liver (and Liverpool Victoria?) thought to be in talks with each other, we could quickly see what once was seven providers become just two, no doubt with further changes on the horizon.

But why now? Why all this activity when the economy is stuffed? It's not as if intermediaries and the wider industry aren't already tied up with RDR, Solvency II and budgets of varying kinds, including yesterday's.

Could it perhaps be the failings of the protection market itself? Are we finally seeing the real cost of the so-called protection price war? Could it be that the margins on writing ever-cheaper life cover are just too small, while sales of better products with better margins, such as critical illness and income protection, continue to struggle?

Everyone - well, almost everyone - has been going for the lowest hanging fruit in this market for too long. In true chicken and egg fashion, everyone blames somebody else ("You started the price war",  "No we didn't, you did") and, at the end of the day, you have to swim with the tide, don't you?

For too long, and at too many levels, the focus has been on selling cheap life cover, even though this isn't the protection that most people need most.

As an industry we aren't selling enough of what our customers need most. Tell this to a retailer from another industry and they'd be perplexed to say the least.

One day we might be left with just five providers in the market offering poorer service and vanilla products, with new entrants put off by the scale of the competition and small margins.

How might this new market shape impact strategically on other parties such as reinsurers and protection distributors? There could soon be as many reinsurers as there are insurers, and does the mass market consumer still need a protection IFA if there are only five similar products in the market?

Someone once said that if you make your own bed you lie in it. Maybe, just maybe, if we'd worked together to sell more of what people really need we would all be in a better place.

Kevin Carr is chief executive of the Protection Review and managing director of Kevin Carr Consulting.

 

© Article reproduced by kind permission of IFAonline

Kevin Carr, chief executive of the Protection Review, says forecasts of just five major players in the UK life space may prove accurate after all...

The chief executive of the Protection Review rates this month’s developments in the protection market...

The chief executive of the Protection Review rates this month’s developments in the protection market...

5. World Cup marketing

Everyone loves the World Cup. Well, some don't. But they should do. Right now it feels like every TV advert has got a bit of footie in there somewhere and, while I'm sure I'll be sick of it in a few weeks' time, right now it feels great.

I get a warm, tingly feeling inside when I see a great teaser ad for the World Cup - and one in particular stands out. I don't drink lager, but I may have to neck a pint of a certain brand beginning with ‘C' in a few weeks time!

I'm pleased our industry is playing the game too. Pacific Life Re and PruProtect, to name but a few, are running fantasy football competitions while Aviva has pictures of children holding, what looks like, the 1966 World Cup trophy. Bring it on! VERDICT: UP

4. The Future of commission

In a recent Protection Review survey, more than 80% of respondents, including intermediaries, life offices and reinsurers, believe commission will still exist in the protection market in 10 years' time.

It may well look different, and could have a different name but, if the majority view is correct, commission in protection might just outlast the FSA itself. VERDICT: UP

3. Fortis ‘Real Life Cover' commission up 10%

The Fortis Real Life Cover product is excellent. Ok, as one of the three main designers I'm a tad bias, but in short, if you know someone who needs to cover all the protection bases but for whatever reason cannot afford the perfect portfolio and/or is not interested enough to go through a complex menu-plan, this could be the product. And I know plenty of people like that.

Increasing the commission will draw attention to the product, which will hopefully make a few distributors take a closer look, which is no bad thing, but raising the commission probably won't impact directly on sales.

What advisers really need is better training, from an independent source, which typically means not from life offices, who can be patronising and counter-productive as this column has flagged before. VERDICT: UP

2. Critical Illness claims stats
 

The Telegraph recently ran a ‘league table' of declined CI stats in alphabetical order, showing the percentage of declined claims by each provider in 2009.

It showed that providers such as Legal & General, Axa, Bright Grey and Friends Provident refused 7% or less of all claims, while other providers were slightly higher.

This ongoing development of LifeSearch's original campaign is very positive for the CI industry. There was a line in this article which read: 'Aviva, Britain's biggest insurer paid out a total of £118m to 1,499 claimants on CI policies last year' which, along with falling decline rates, is exactly the kind or reassuring consumer message we need.

However, to repeat a point this column made many years ago, let us be careful not to fall in to the ‘league table' trap by using these stats to base individual decisions.

Paying more claims and publishing the statistics is gradually improving the overall CI brand, but we do not know when claims will arise and therefore we do not know whether the companies recommended will still be around when the time comes. Past performance is no guarantee for the future, which I'm sure I've read somewhere before. VERDICT: UP

1. Protection intermediaries need a trade body

Do protection intermediaries need a trade body to represent their interests? Are any of the existing bodies capable of doing so? Without mentioning any names, there is talk of such a thing behind the scenes, but it may still be talk in years to come.

What do you think? Do we need a few like-minded intermediaries round the table, who are willing to pay a little bit of money, and then ask those who depend on the business to match it - namely life offices and reinsurers?

Then we would just need someone to run it. Are there any volunteers out there? VERDICT: DOWN

Kevin Carr is chief executive of the Protection Review and managing director of Kevin Carr Consulting

 

© Article reproduced by kind permission of IFAonline

The chief executive of the Protection Review rates this month’s developments in the protection market...

Mortgage intermediaries investigated over protection sales

Fears of an increase in commission-led protection sales have caused the FSA to review the sales standards of pure protection products sold by mortgage intermediaries.

In its recent RDR consultation paper, FSA says it is concerned by the movement of intermediaries into product areas where they have little or no experience and will be reviewing the sales standards of pure protection products by mortgage intermediaries, which is fair comment.

However, while some advisers have criticised the regulator for targeting smaller practices when it should concentrate on bigger players (banks), the most important issue is that many people have taken on more debt than ever before, which needs protecting against ill health and redundancy.

I’ve said before it is quite difficult to mis-sell or even over-sell proper protection products (few claimants complain about having too much cover) and, while the debt probably should have been protected at the time, it will be a case of ‘Better late than never’ for many. Verdict: TBC

IPTF roadshows

The Income Protection Task Force (IPTF) is going on the road with a series of adviser seminars across the UK to educate advisers on the need for IP and its importance as part of the financial planning process.

Many advisers say IP should be customers’ first protection priority. But sales lag far behind that of life cover and critical illness. Let’s hope these roadshows really help to raise the profile of IP. Verdict: Up

New ABI director general Kerrie

The new ABI director general, Kerrie Kelly, will be the keynote speaker at this year’s Protection Review dinner on 15 July. Kerrie will join a list of outstanding speakers at the event, including the CEOs of Friends Provident and Aegon UK. Verdict: Up

One-question protection

Aviva is piloting a system that lets advisers sell customers ‘top-up’ protection after asking them just a single question.

Much of the success in the over-50s protection market has been down to a simplified repeat sales process where people who bought once, usually quite recently, are given the chance to top up their cover without all the hassle of starting again.

Many of us have said over the years that this process could benefit the mainstream protection industry greatly and so I hope Aviva’s trial is more than successful. Verdict: Up

Total premium disclosure

If, when about to buy your last car, the salesperson pointed out exactly how much you would spend on petrol and car insurance over the lifetime of owning said vehicle, what might you think?

If you think this sounds rather wise, then you will be in favour of this particular FSA requirement. It not then you, like many within the protection industry, might feel it’s a bit over the top. You may also think it could put some people off buying the cover they need in the first place.

Last month, the Association of British Insurers (ABI) issued guidance on how insurance providers should disclose the ‘total premium’ for individual long-term pure protection contracts.

In a nutshell, anyone selling protection will need to tell the customer the total premium over the term of the contract at the start. But there seems to be no evidence suggesting consumers would benefit from this change. This really is a pointless exercise that could easily be ignored if it wasn’t for the potential negative effect that such information can produce. Verdict: Down

© Article reproduced by kind permission of IFAonline

From pet cover to soap storylines, Kevin Carr dissects the latest protection industry developments in his exclusive monthly blog.

5. New life office(s)

If the number of media calls on this one are anything to go by, a new life office is set to enter the IFA protection space very soon. Competition is good, new ideas are good, raising the profile of protection is good. So it's hard to see a downside to any new market entrants.

Who might it be? Met Life and HSBC have been rumoured for many years, or perhaps it is the return of Simon Burgess. Or probably none of the above!

VERDICT: UP

4. Soap story-lines

It's still there in the soaps. Last week's Hollyoaks (don't ask, please don't ask) featured several debates around state benefits and how difficult it is to get by when illness strikes. Alas there was no mention of Income Protection, but we can't have it all.

What a shame there isn't a generic protection advertising campaign on TV to make the most of these story-lines. What a shame indeed.

VERDICT: UP(ish)

3. Family Income Benefit

Scottish Provident reported a four-fold increase in FIB sales recently, which is great.

FIB has always been a good little product that has so often been ignored and undersold. A quick recap: FIB is a life and/or critical illness cover plan, just like normal ones, except claims are paid as an annual income instead of a lump sum. While a lump sum is usually more attractive on the eye, there are times when an income is much more suitable - and cost effective.

Could we do more as an industry to increase awareness of FIB and make it easier to sell? Oh yes. Why oh why oh why is FIB a separate product with separate literature and thus separate and unnecessary costs? Why isn't it just a tick box on the main application form following the sum assured box which simply says ‘Lump sum or annual income?'

As for the name - whoever came up with ‘Family Income Benefit' should be forced on a date with John Terry until they both say sorry.

VERDICT: UP

2. Pets and humans

"It's staggering to think that so many people insure their pets against illness, yet they do not have the same urgency with their own health." David Thompson, CEO of DG Mutual.

Having recently acquired a pet of our own, I can confirm the insurance buying process for pets isn't that far apart from life insurance. There are all sorts of options, a long list of questions and plenty of potential pitfalls at claim stage if you don't read or understand the small print. Just like life and health insurance.

We can all defend the reasons why the process has become so complicated all day long, but if we don't get smart soon and make it much, much easier we might not have an audience to defend it to.

VERDICT: DOWN

1. Commission disclosure

Protection Review of course agrees commission should be disclosed, it's the fair and ethical thing to do.

However, many high street retailers and websites sell life cover, and they receive commission just like an adviser might (and in some cases potentially more commission than some advisers). Some, however, do not disclose it.

There should be a level playing field. If an adviser discloses commission then shouldn't everyone who receives a commission be required to act in the same way?

Also, there are commissions included with many general insurance products such as car and home insurance. Should these be disclosed as well? Where do we draw the line? Do we need to know how much profit the landlord makes from each gin and tonic we order?

Likewise, at what point should commission be disclosed - at the very outset, at the quote stage, at application stage, at policy document stage?

As with all regulation and good intentions, the potential unintended consequences should be thoroughly thought through.

VERDICT: TBC

Kevin Carr is chief executive of the Protection Review and managing director of Kevin Carr Consulting.

© Article reproduced by kind permission of IFAonline

In the first of his exclusive new series, Kevin Carr looks at the ups and the downs this month in the protection industry.

5). PPI CLAIM FIRMS

Payment Protection Insurance (PPI) wasn't always a great product to say the least. Some people were mis-sold policies that often had very little chance of being claimed upon successfully. They should get their money back accordingly.

However, having looked at various PPI claims sites, I'm yet to find one that mentions proper Income Protection (IP), let alone one that attempts to explain the differences between IP and PPI.

I wondered if the claims people on the phone knew... so I called a few. I found they didn't really have a clue. There is a script to follow and follow it they do. Some said we only deal with ‘single premium PPI' policies, which thankfully rules out IP, but most just said give us your details and we'll send you a claim form.

I wonder how many IP policies end up at their door?

VERDICT:DOWN

4). PAID CLAIM STATS

An obvious winner with Protection Watch (PW) this one. Publishing claims statistics - once there is enough detail to make it meaningful - is the fair, right and transparent thing for our industry to do. Those who are publishing their stats are in excess of 90% for both critical illness (CI) and IP, and rising, which is great, although there are still some well-established companies yet to publish them.

What's keeping them?

VERDICT:UP

3). FSA CP 09/31

The saviour of the protection industry or, as one leading commentator recently put it, "A sting in the tail from the industry's favourite whipping boy"?

This is, of course, the December 2009 Delivering the RDR paper that wisely, and thankfully, allowed commission to continue in the ICOBS-regulated protection industry.

So what's the problem? Good question that. Some feel the devil in the detail spells a potential minefield for IFAs who wish to sell across both COBS and ICOBS regimes.

FSA seems to be suggesting that, if an adviser wants to receive commission on protection business, he or she must transact this business only under ICOBS, while any other recommendations, such as investments or pensions, fall under COBS.

Is this a potential administrative nightmare, that could lead to confused customers not taking the advice they would otherwise have done? Or is it nothing much to worry about? After all, two regimes already exist in tandem, such as in the mortgage market.

Or maybe, just maybe, could FSA be trying to make it harder for COB advisers to migrate into ICOB protection sales just for the commission? I hope not, because, as is so often the case with regulation, the unintended consequence could cause far greater damage.

VERDICT: DOWN

2). SOAP STORYLINES

My protection chums and I have noticed several protection-related storylines in the soaps recently. While the detail isn't always accurate, scriptwriters don't tend to include things that won't attract the audience's attention, which means protection - be it redundancy, illness or death - must be higher on the consumer's agenda now than it was before.

VERDICT:UP

1). NEW THINGS!

New things are always likely to be a good thing, because PW likes innovation. January saw a new IP product from Legal & General and a very interesting new website from Exeter Friendly where you can ‘Get Bob dancing!'

VERDICT:UP

© Article reproduced by kind permission of IFAonline

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