John Joseph on Protection

What is our profession all about? I ask that question as, 33 years ago, I started knocking on doors selling dreams – dreams of security in life and dreams of security for one&#39s dependants in the event of one&#39s death.

The one thing I did know was that everyone does die and, with only one notable exception, no one comes back.

So what is changing? Well, if I told a client that we would guarantee to provide life cover but it would only pay out in the case of an accident, if the client bought it, that would be a risk he or she would be prepared to take.

But what if a year later I told the client: “It still pays out on accidental death but it has to be at night while walking along a main road wearing a fluorescent jacket.” I have a feeling that the client would begin to feel sceptical about the meaning of the word guarantee.

Enter the reinsurer and the insurer. We know they are hurting from the claims coming in thick and fast from clients who have been diagnosed with illnesses they thought could not be detected or, if they could, only many years from the inception of the policy, at least giving a fighting chance to invest the premiums to build up reserves.

But medical science and the world markets have combined to thwart their plans by dealing a triple whammy – early detection, new life-saving drugs and equipment, then the most hurtful of all and nothing to do with medicine – terrible investment performance, which I suppose can make you feel sick, so there is a medical link.

So now they are proposing to create a renewable-definition critical-illness policy.

I suppose if you price it right and if the IFA understands it sufficiently to be able to get the message across, and if the client understands the major risk they are taking, then it is okay to bring the product to the table.

May I make a suggestion for the far-sighted product marketing gurus employed in our profession – do not try to foist a product on us that allows you to escape payment of a claim.

We have enough problems with the amateur journalists who do not even have an FPC1 qualification, jumping on the rejected claims for articles in the national press, without you fuelling the fire.

If I was in charge of product design and launch for an insurance company, I would run the two policies side by side, the same way as you can have guaranteed or renewable premiums from the same company.

Now there is an interesting thought for the reinsurers – a combination policy of guaranteed rates and reviewable definitions or reviewable rates and guaranteed definitions. Then twist it round so that both are guaranteed or both reviewable.

John Joseph is director of John Joseph Financial Services