Do we need a protection hierarchy of needs?
Is term life cover 10 times the product income protection is? Do 10 times as many people pop their clogs every year as those who take six months or more off work due to say an illness or stress?
Of course not. So why does term life cover outsell income protection by around 10 to one? And likewise why are twice as many life policies sold compared to critical illness cover, when a CI claim is around five to six times more likely?
Well, we know why of course, life cover is cheaper and (so much) easier to sell. Plus, you do not tend to recommend multiple IP policies to one client/family, when you could easily justify three to four life policies to cover different risks.
That said, most of us would agree there has been too much focus, for too long, and by too many on selling little more than 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 might an agreed, high-level, hierarchy of needs for protection make a difference?
Should we ever get that far, we would need to get the message across via consumer groups, websites and the media. We would also need to keep it simple and make some very basic assumptions, perhaps such as no existing cover, good health and a realistic level of budget (otherwise it just gets too complicated and as an industry we would never agree on anything).
Although on the flip side, it might be too simplistic to just say IP is better than CI, for example as we may decide it depends on the actual level of cover and not just the type of product.
So, here is one for starters. Feel free to argue about it on this forum , because that Is what we are after – intermediary and industry feedback. We will never get everyone to agree of course, and there will always be challenges, which is healthy.
1. Income protection (specifically own occupation)
2. Critical illness cover (including cover for early stage cancers)
3. Life cover (term and whole of life, depending on the circumstances)
4. Private medical insurance
5. All others (including other versions of the above)
Does that mean that if you cannot obtain own occupation IP you should buy a good CI plan instead? Well, yes maybe. And vice versa.
But what do you think?
Kevin Carr is Chief Executive of Protection Review and Managing Director of Kevin Carr Consulting.