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

• 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

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

 

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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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

• 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
 

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

 

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, 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

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