Protection debate: Are TV adverts working?
Peter Chadborn, director of Plan Money, Alan Lakey, principal of Highclere Financial Services and Roy McLoughlin, senior partner of Master Adviser debate new products, the prospect of mandatory protection and TV adverts.
Friends Life launched its individual protection proposition last month. Do you think it will prove popular with advisers?
Chadborn: I have not been one to voice concerns over a contracting provider market and if the result of consolidation is Friends Life’s new Protect+ proposition, then such consolidation is positive.
I have looked at the product in detail and believe Friends is justified in its claim to have combined the best of breed from the previous brands as I can find no criticism whatsoever.
Time will tell if the service levels and pricing are maintained but if premiums are within approximately 10 per cent of the cheapest, that will be good enough for us.
McLoughlin: This offering is a welcome addition to the multiplan family. The popularity of these plans seems to be on the increase as they are easier for consumers to understand. Clients want simplicity, not half a dozen policies scattered all over.
The fracture cover and best doctors are two welcome additions and the flexibility this policy provides is first class. However, I still do not think there are enough of these plans in what will be an expanding market.
Lakey: I really welcome this. It is well thought out and aims for quality as opposed to being a price-driven product. The test will be how good Friends’ underwriting and administration is as there have been some issues in the past.
If it can be successfully surmounted, Friends Life will end up with a high-quality offering that many IFAs will be using.
Last month, PruProtect’s Deepak Jobanputra raised the issue of protection becoming mandatory. Do you think this is a good idea or is it too impractical?
Chadborn: I have a lot of respect for Jobanputra and the work he does with PruProtect and I expect his comments were intended to stimulate debate rather than a serious expectation of driving compulsion.
It would be great if the majority of the population had a minimum level of protection but compulsion would surely be impossible to enforce, not least because of underwriting issues. I think Jobanputra’s comments were motivated to get protection higher up on the agenda.
McLoughlin: Jobanputra is a visionary and I love this idea in principle. In practice, I cannot see it occurring but related to this would be something the Income Protection Taskforce has been asking for.
It would be great if employers were compelled to spell out to staff exactly what protection benefits are and, in particular, what the situation is in the event of long-term illness. We hear incorrect assumptions on a daily basis as to the benefits employees enjoy, which may lead to many being under-insured or not insured at all.
We need to do as much as possible as an industry to enlighten clients with advice, which will then lead to more of the population taking out cover.
Lakey: It is an interesting debate but a scary proposition on a personal level. As a libertarian, I do not like being told I must do something. The practicalities of there being some kind of minimum amount of life insurance could also be a double-edged sword. Somebody who is given £50,000 worth of life insurance might say, ’Well, I do not need to do anything now I have got this.’ It is a perfect excuse for someone who does not want to engage.
You could say compulsion may persuade people to move up to the next level of cover but I do not believe it would happen because of the apathy of the public. There are also the same old questions - who is going to pay for it and how will it be underwritten?
Many industry figures have suggested the retail distribution review will lead to an upswing in protection as advisers look to it for an extra income stream. Do you think this will be the case?
Chadborn: By and large, the more advisers operating in this area the better but there are two aspects that concern me. First, why is there no protection exam to gauge competence in this field? Second, who is going to take responsibility for training?
Anyone new to this market needs to learn that making recommendations based on cost alone is a surefire way of being unsuccessful. They also need to keep abreast of recent developments.
The recent training sessions run by the Protection Review were first class and there either needs to be many more of these or other organisations need to be putting on similar events.
McLoughlin: I concur the RDR will lead to an increase in protection as advisers find it increasingly hard to seek out the fee-paying clients in the traditional pension and investment arenas. Added to this is the introduction of Nest, which arguably will lead to a drop in personal pension advice.
Too many people are either not insured or have life-only, so it is vital that income protection and critical illness are foremost in advisers’ armouries. Providing advisers are competent, there is definitely enough business to go round, so I do not perceive a threat. What would be useful would be for a stand-alone protection exam, which must be able to count towards level four qualification.
Lakey: It could but it may be a short-lived phenomenon. The question is, how many people who call themselves wealth managers will be looking to move into protection? Some will, as it will continue to pay commission but the draw- back is they might only be doing it as a temporary transition into whatever RDR offering they envisage.
They may see it as a means of keeping afloat until they get their proposition up and running. It may also be that advisers who fail their exams and so are denied the investment and pensions route - but are allowed to deal with protection - do so until they pass their exams and then revert to wealth and pensions.
Some providers offer emotional support for claimants through programmes such as Red Arc. Do you think added extras such as counselling are important product differentials?
Chadborn: Unequivocally, yes. Anyone who thinks otherwise has clearly never had to deal with a claimant on a personal level. As an adviser, if you see your role as supporting a client in the event of a claim in their hour of need, then such support packages are essential.
This also goes for stand-alone life cover. The public does not know the likes of Red Arc, Best Doctors and Bupa Healthline exist, so an adviser’s worth can be demonstrated by including them in the advice process.
McLoughlin: One only really appreciates these services when you experience a live claim. I think they are a welcome addition to the protection menu and the powerful message they send out to clients cannot be replicated by any amount of publicity. As the general public still views insurance cynically, these services and the wonderful stories that come from them can act to increase faith in how vital our industry can be.
Lakey: I do not use any of these as a method of choosing between the companies. The reason for that is they are normally based on critical illness and if I was to use that as a gauge as to the best company, I would have to assimilate that with my own view. Some people who have used them swear by them and I welcome that they exist but I cannot bring myself to use them as a differentiator.
Aviva and Unum’s TV ad campaigns have been the subject of much scrutiny this year. Have they given protection the publicity boost it needs?
Chadborn: Aviva should be commended for giving protection insurance the same level of TV advertising it has given to general insurance. Whatever your view of the adverts, the point is that they make for excellent conversation openers for advisers with their clients, putting protection on the agenda. Recognition should also be given to Unum for following Aviva’s lead in delivering prime-time TV advertising. Its income protection advert is very good.
McLoughlin: Aviva and Unum’s ads have been a welcome boost to the income protection industry in particular. The ensuing controversy has only added to this positive message. Advisers need an excuse to talk to people about protection, whether we like it or not. When people have had their minds nudged by adverts, this process is made so much easier, especially if it features a real-life case study.
However, we appreciate that not all companies have the means to fund such big campaigns, so we would urge others to publicise protection other ways.
The crucial next step is to make it clear where consumers should go to obtain further information and it is vital that the insurers drive the resultant interest to seek financial advice.
Lakey: I would like to think the adverts have given protection a boost but it is hard to assess the benefits. I am sure Aviva is working out how many people have taken out income protection and there probably will be an uplift.
However, I do not think it will prove financially beneficial to most companies to advertise. Aviva can afford it but, as we know from Tom Baigrie’s previous initiatives, other companies have fallen back when they have been asked to put their hands in their pockets.