Have you heard the one about the main breadwinner in a household being directly compared to an ATM sitting in the corner of their lounge, and what would happen in the event of it breaking down and not being able to dispense cash when it's needed most?
You have? Me too, but how often are we hearing it nowadays?
Perhaps innovation in the protection sphere, and more notably in the income protection space recently, is removing the need for this type of parallel. Perhaps the fact that a lot of us don't save anymore, treating ourselves to expensive and immediate purchases on a credit card is driving the realisation that we do in fact need to protect our income. Is it because suddenly, customers now see the differences between Critical Illness and Income Protection (IP), and are recognising that they perform different functions in the way claims payments are assessed and paid, and what the cover actually protects?
Explaining some of the terms long-associated with IP will be one of the biggest challenges – split deferred periods, short-term versus long-term, risk categories (or occupation classes), own, suited or any occupation, ADLs, and not to mention reassuring the customer that IP is not PPI.
Whatever the reason, you have to agree that it is encouraging to see Income Protection going through a bit of a growth spurt at the moment. Webline, Synaptic's protection portal, has enjoyed a 58% increase in IP quote requests when comparing Q3 2018 with the same period last year. In fact, during the last quarter alone, nearly 50% of all quote requests through Webline have been for IP, and this resurgence is being reflected right across the market.
If only it were that easy for an adviser to eulogise about how popular IP has become recently and get the customer to sign on the dotted line. Explaining some of the terms long-associated with IP will be one of the biggest challenges – split deferred periods, short-term versus long-term, risk categories (or occupation classes), own, suited or any occupation, ADLs, and not to mention reassuring the customer that IP is not PPI. Putting PPI to one side, more complaints are received by the Ombudsman about the definition of occupation used than any other IP complaint. So why do IP policies continue to use these rather confusing expressions? If we swapped the current vernacular for more accessible and relevant words, perhaps some industry bodies wouldn't need to promote a Jargon Buster or Glossary of terms section on their websites!
If you have been able to help the customer understand the mechanics of IP, it is ultimately the really positive work that providers are currently launching which makes the product real. Features being added to many policies are providing tangible benefits to claimants. Think about the Rehabilitation services. There's Day One cover (no waiting period, sorry I mean deferred period), especially relevant for the self-employed, and nowadays the ease with which a customer can apply along with the ability to have an underwriter directly help the customer with any tricky questions. That feature is particularly pertinent for any vulnerable customers taking an IP policy.
The self-employed contribute more than £250bn to the UK economy, but still fail to save more than £50 a month. Many believe they are ineligible for IP. Or is it because many advisers steer away from the perceived complexity surrounding an IP product in certain situations?
With that in mind, are we considering all segments of potential customers enough, particularly self-employed and vulnerable customers, and their ability to cope with understanding the intricacies of IP? Are they not bothering because of the perception that it is too complicated to understand or because they cannot afford it? The self-employed contribute more than £250bn to the UK economy, but still fail to save more than £50 a
month. Many believe they are ineligible for IP. Or is it because many advisers steer away from the perceived complexity surrounding an IP product in certain situations?
I was at a meeting recently where it was hot off the press that income from mortgage protection pay-outs would not affect people's means-testing for State benefits. What a fantastic start to making IP accessible to those deemed as being in a vulnerable position financially. But the challenge remains to make IP simple for advisers and customers alike.
Claims payment statistics aren't as attractive (87.2%) as IP's cousins – Life (98.0%) and Critical Illness (92.2%) – but they are improving. However, claims paid rates shouldn't be the only fact customers pay attention to when it comes to IP, perhaps as they do with other insurance products. It shouldn't be about convincing the customer they need the cover, it is about helping the customer recognise the values in protecting their income before they should even start thinking about investments, and any other needs they think they may have. Surely, IP is the bedrock of any financial needs conversation. Isn't it the very first financial product you should speak to your customers about? The General Public is not as financially resilient or savvy as it probably thinks it is, and the whole, "it won't happen to me," objection must be overcome and gradually withdrawn from circulation.
Some customers may not also realise the employee benefits they enjoy through the workplace, so they should be made aware that any potential loss in their income may not be fully covered by their employer's scheme. Likewise, the self-employed, must learn that for their business to continue producing the same income levels, they must consider IP as a crucial component to their financial planning. This replacement income must cover their lost earnings, so they can focus on their recovery without unnecessary distractions and get back to work as quickly as they can, and in a fit and healthy condition.
Furthermore, whether the absence from work is accident or illness-related, advisers should be thinking about the possibility of their customer requiring a lengthy period away from their place of work. What if the customer has to think about treatment costs as well as managing their monthly commitments? Financial products offering 'peace of mind' shouldn't be regarded as tugging on the heart strings but seen as an integral part of surviving a financially unknown future.
So, current statistics would indicate that the UK population is taking more notice of the cash dispenser in the corner of the room. We just need to make sure it is plugged in and serviced regularly so it's ready to dish out those readies every month!
Webline offers IP quotations from most of the top IP providers in the market. Following just a few simple inputs, IP quotes can be quickly obtained either as standalone products or as part of the multi-benefit service we provide.