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Protection Watch: Reducing complexity and outsourcing to advisers

Protection Review chief executive Kevin Carr looks at recent market events

Products: Stripping it back

There is a fine line between making protection products better and making them more complex by default. Waiver of premium, terminal illness benefit, counselling services and so on – they are all generally great add-ons with real customer value. But not everyone needs them and they can sometimes become a barrier in the sales process.

Children’s cover, for example, can add to the price. Yes, for many people it is has become an important area of cover but not everyone has children or plans to do so.

Royal London has recently made total and permanent disability cover optional, which is a controversial move. While around half of all claims made under total and permanent disability are declined, it is a small number overall (and let’s not forget that half of those claims are paid). But there are circumstances where total and permanent disability can increase the underwriting process and even lead to loaded premiums. It will be interesting to see how advisers react to the move and whether more insurers follow.

Distribution: The rise of freelance protection advisers

In a recent discussion about the best way to significantly grow the protection market, one of the many answers was the ongoing growth of freelance protection advisers.

Such advisers, who are experienced in the protection sector, provide advice to clients as an outsourced protection department within an existing adviser firm where protection is needed but is not being given. They manage the advice and administration, agree a fee or commission split with the adviser firm, and may not even need a desk.

protectCover: Over-55s most exposed

According to LifeSearch’s annual Health, Wealth & Happiness Report, over two thirds of UK adults either have not purchased any life insurance (57 per cent) or do not know whether they have done so (11 per cent), with those over 55 being the most exposed.

Just over a quarter (27 per cent) of over-55s said they had life insurance, 2 per cent of whom said they had cover arranged via their employer. The over-55s were also insured for the lowest amount across the three age brackets included in the research, at £72,690 on average.

Also on the radar…

  • Vitality is making the new Apple Watch available to members for free if they stay active. Members can get their hands on the Apple Watch Series 3 and Apple Watch Nike+ (GPS) from £29 and then fund the remaining balance by getting active and until 31 December this year, they will be able to get an Apple Watch Series 3 (GPS 38mm) or Apple Watch Nike+ (GPS 38mm) for nothing by keeping fit.
  • The Ombudsman is continuing to investigate level term assurance recommendations on repayment mortgages. The situation, as I understand it, is relatively simple: there is no official ruling on whether it is right (or wrong) to recommend level term assurance on decreasing mortgages (I did it myself) but the notes on file must clearly show that the client had both level and decreasing cover explained, with the price differences and reasons why level cover was more suitable included.
  • Experts are split on whether the industry should adopt a compulsory non-contestability period. According to a recent poll from Protection Review, 43 per cent of respondents said a non-contestability period was not necessary. However, the remainder took a different view, with 11 per cent of respondents saying two years, 32 per cent five years and 14 per cent said 10 years.

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