Many industry commentators have over the years bemoaned that the barrier to more family income benefit sales is the fact that the product sounds more like a Government benefit.
If only the product could have benefited from the focus that child benefit had placed on it after the Chancellor cooked up a storm following last autumn’s Conservative conference by announcing that higher-rate taxpayers would no longer be eligible to claim child benefit.
That level of profile is exactly what the protection industry needs to bring the issue of protection into people’s living rooms.
In terms of the economic environment we are currently in, FIB is a product that makes absolute sense and an option that deserves to have a higher profile than it currently has.
Buying a protection plan paid on an income basis makes perfect sense for cost- conscious consumers looking to protect their family’s future in the event of a critical illness or death. The recession prompted many to think about how they would cope if their income stalled or stopped altogether but, with family pursestrings being pulled ever tighter, the job of the adviser has called for greater powers of persuasion and solutions that make sense.
FIB is an inexpensive solu-tion that clients appreciate and helps take a load off their mind that if the worst happens, their family would have a financial coping strategy.
It is the most cost-effective financial safety net a family could buy. Having it in place to pay for childcare or allow the other parent to reduce their hours at work ultimately allows the family to carry on functioning in trying times.
The fact that FIB pays out a regular income rather than a lump sum from the time the claim is made also helps to sidestep the thorny issue of where the money should be invested.
Having to deal with a potentially large sum of money during an emotionally difficult time presents an issue in itself but in the current climate, deciding where to invest to ensure a reasonable rate of return makes the simplicity and ease of a regular income all the more appealing.
But although an adviser sits with their clients and goes through all the benefits of FIB at the time the client buys a policy, it seems that at the point of claim, this can all be undone when the client is offered the option to commute family income benefit payments to a lump-sum payment.
This is an issue that has been keenly contested in the past, with the two camps, the purists who consider that if income was the choice at the time, then it should remain that way, slogging it out with those that can see the merits of clients who change their mind and opt for a lump sum.
To try to shed some light on the issue and gauge the real market sentiment, last year, Scottish Provident surveyed advisers to see which side of the debate carried more weight. The results were conclusive. Nearly three-quarters of IFAs were in favour of their clients being offered a single payout rather than being forced to take regular payments.
Communicating their options allows customers to evaluate their circum- stances at the time and make an informed decision to suit their needs.
In our experience, around two-thirds of claimants opt for a regular income. Of the remainder, 12 per cent decided that after a few income payments, they wanted to take a lump sum. This ultimately proves how flexible this product really is and surely this best serves clients’ interests?
Jennifer Gilchrist is senior product development manager at Scottish Provident