View more on these topics

In sickness and in health

IFAs can expect to be targeted by providers of income protection policies in the near future. Income protection is low on the list of products currently sold by most IFAs but that might change in the post-stakeholder landscape.

Given the withering of state provision and the corresponding onus on individuals to take care of themselves, income protection is likely to become increasingly relevant.

Unum is the market leader in income protection, with a share of 30 per cent. Director of marketing Eugene McCormack says the income protection marketplace is largely untapped. Most income protection is owned through employee benefits – few people own income protection on an individual basis.

McCormack is happy to admit that although income protection has been around for a while, it is at the relatively early stage in development.

Scottish Equitable will be entering the market with a product specifically for individuals to be sold through IFAs. Unlike Unum, ScotEq product development director Laura Shanks says its research show the product will be sold on the back of mortgages. McCormack thinks that stakeholder could be a conduit to income protection.

Income protection has a reputation for complexity because of the many variables that need to be taken into account to provide appropriate cover.

McCormack says: “It is up to us as product manufacturers to simplify articulation to enable IFAs to make clearly understood propositions.”

He says that income protection, unlike life insurance, is not a product that has become a commodity. It is an ideal product for the IFA to sell. McCormack says income protection could provide a welcome revenue stream at a time when many of the IFA&#39s traditional products disappear from the menu.

According to the Consumers&#39 Association, every year nearly two million people are off work for more than six months through illness or injury – 20 times the number of people who die before 65.

Some bigger employers, such as the NHS, pay staff when they are sick on full pay for the first six months and then half-pay up to a year.

Other employers will offer income protection as part of their employee benefits package – this accounts for the majority of policies sold. But after the first 12 months off work, most employees are left with no income.

Statutory sick pay is currently £163.60.20 a week for up to 28 weeks. Once that entitlement has passed, there is incapacity benefit at £163.60.20 a week, rising to £163.67.50 a week after a year off work.

The self-employed are entitled to incapacity benefit but not statutory sick pay.

Few clients would be able to maintain their lifestyles at these income levels. Shanks says, in advising clients of the appropriate cover, IFAs would have to make sure that the provision would dovetail with the client&#39s employment contract and any other forms of income that they might have.

An IFA would also have to consider the following variables. The deferment phase (after what period of incapacitation the protection kicks in), the level of cover needed,possible exclusions and whether to add a spouse on to the policy. An area of that needs careful attention is the different definitions of the various providers on what constitutes an inability to work.

One of the reasons for the low level of take-up of income protection has been the success of critical-illness cover which is often sold as an alternative. Scot-Eq, for instance, is laun-ching its life and criticalillness products in advance of an income protection product later this year.

Shanks says: “They should be seen as complementing each other, not as mutually exclusive. What happens if the sickness or accident incapacitates you but does not qualify under critical-illness cover?” The products can be combined so that critical-illness cover repays the mortgage, and other outgoings are covered by the income protection. 



It is time for a reality check. Why do people go into business? Why did you become an IFA? We all have the same reason – to make money for yourself an your family. If you are in business for yourself, why would you take the commercial risks if not to offer the prospect of […]

ScotEq aims to boost protection

Scottish Equitable claims it is on course to take 10 per cent of the individual protection market by the end of 2001. ScotEq says this is double its original expectations for its protection product&#39s market share and its success is largely due to the response to the marketing campaign. The campaign included £163.100,000 of trade […]

Funds Direct – 7 Of The Best Isa

Monday, 19th March 2001.Type: Stocks and shares mini or maxi Isa.Aim: Income and growth by investing in unit trusts and Oeics.Minimum investment: £1,000.Maximum investment: £7,000.Catmarked: No.Investment choice: Investors choice of a maximum of 7 funds from approximately 1,300.Charges: None.Offer period: Until further notice.Commission: None.Tel: 08700 738393. 

Treasury &#39guessed&#39 annuity reform cost

The Treasury has conceded it did not accurately calculate the cost of alternative regimes before opposing relaxation of annuity requirements. Prime Minister Tony Blair said in the House of Commons last week change was ruled out because of the cost. The Budget Red Book claimed it would cost hundreds of millions. Money Marketing understands that, […]

Finding security in bond markets

Martin Foden, head of credit research at Royal London Asset Management, explores the role of secured bonds, considering the impact of default and the characteristics of secured bonds versus supranationals and highlighting some examples. He also examines the evolution of the credit market and rating agency inefficiencies. Read the article in full: The value of […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm