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Helping IFAs take a long-term view

Providers think healthcare is an untapped market and are striving to bring IFAs around to their way of thinking.

The introduction of low-cost products such as stakeholder pensions is pushing many providers towards healthcare as an area for future business. As a result, providers are seeking to raise the sector&#39s profile for IFAs by raising product awareness and highlighting areas of potential revenue. But IFAs still seem reluctant.

Advisers hesitate offering long-term care products to clients following the Government&#39s recent response to the royal commission report on LTC. The Government raised the capital threshold asset limit from £16,000 to £18,000 and stated that, during the first three months of residential care, the value of a person&#39s home will be disregarded from the means test. However, the report has produced one unanswered question which is causing IFAs to hesitate.

The Government says that, from October 2001, the National Health Service will meet the costs of care delivered in nursing homes regardless of personal assets. It says this change will benefit around 35,000 people at any time and people could save up to around £5,000 a year on nursing home costs. However, providers say the eligibility criteria of nursing care still needs to be defined as it is difficult to distinguish between nursing care and personal care.

Also,the Government has not said how nursing care will be assessed, that is, whether this will be on an individual assessment basis.

Free nursing care will affect the cost of LTC insurance but, until this issue is resolved, there is very little providers can do.

Norwich Union long-term care strategy manager Sandy Johnstone says it would be wrong for IFAs or customers looking at LTC insurance to automatically assume cover will be reduced by £5,000 because not everyone will be eligible for the whole amount.

He says: “Until the Government says how the free nursing care will work, it is difficult for an IFA to work out how much clients should pay. Therefore, it will be difficult to work out what benefit level should be worked out for the insurance policy.”

There is only a year until free nursing care is implemented and the resolution of this issue must be a priority as it not only affects future policyholders but also people who are presently in nursing homes as they are currently paying the total cost of their care. These people will want to know how this affects them and it will take time to assess these cases. Therefore, providers and IFAs need to be able to start planning as soon as possible.

Johnstone says it is important that IFAs do not let these uncertainties deter them from setting up policies. He says hesitation could led to customers losing out should they become ill and need LTC before the policy has been implemented.

Many providers have promised to change the terms of policies in line with changes to legislation and Johnstone says IFAs should advise clients to insure themselves straightaway.

He says: “The whole idea of insurance is to protect yourself from uncertainty and so it defeats the object to delay because of uncertainty.”

The changes in the LTC sector demonstrate how important it is for providers to ensure IFAs are kept up to date. Government initiatives such as stakeholder are placing more emphasis on individuals taking responsibility for their financial future but the public still assume the state offers them adequate protection and this is not always the case.

Unum director of marketing Eugene McCormack says people must realise disability insurance is often as important as life insurance.

The state benefit for long-term incapacity is only £67.50 a week and this is not guaranteed. McCormack says there are a number of bureaucratic processes people have to go through to qualify, so the need to raise IFA awareness of this issue is a top priority.

It is important that IFAs understand the need for healthcare products and providers are recognising they must spend time working with IFAs to provide background knowledge and increase product understanding.

Providers are producing training material and holding roadshows to inform IFAs about the market and give them the tools to write more business. An IFA needs to be able to talk to clients about healthcare with authority.

Scottish Provident product marketing manager Roger Edwards says the company is encouraging IFAs to run marketing campaigns and mailshot clients. He says it is important for IFAs to review existing policies and ensure they are still appropriate for the client&#39s needs.

Edwards says: “Protection products are now more flexible and can change to go along with a client&#39s changing lifestyle. Ideally, policies should be reviewed once a year to keep up with a client&#39s lifestyles.”

He says many clients have some form of income protection but are often not covered for critical illness. Policies can be upgraded without having to be rewritten and this is a good way of marketing for new business. Such campaigns not only generate new business but are also a good way of maintaining clients as it reassures them that they are not being forgotten or ignored and also ensures an IFA&#39s client list is up to date.

IFAs need to face up to a potential drop in income following the introduction of stakeholder and other low-cost products. Could healthcare be the area that helps make up the shortfall?

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