PPP Healthcare has introduced the lifetime care asset protection bond, a long-term care product designed with the co-operation of Axa Sun Life. We asked our panel to compare it with similar products from Scottish Amicable and Scottish Provident.
Looking at how suitable for the market the PPP Health care product is when compared with the other two, Howell says: “All three products suit the m
arket in general. However, there are small variations in what is on offer which will probably bring the selection process down to individual choice and client specific requirement in most cases.
“Because of the historic nature of the core business of the three companies, it is quite possible that clients will relate to Scottish Amicable more as an investment house, to Scottish Provident as a life protection insurer and to PPP Healthcare as a private medical insurer.”
Bawtree says: “PPP Healthcare is the leading provider of LTC and has linked up with Axa Sun Life to provide an investment-linked contract. Scottish Amicable and Scottish Provident are also both offering an investment-linked contract. This will provide yet another way of providing LTC protection but has an element of capital protection.”
Evans says: “The PPP Health care product is a combination of a bond with life cover and a single-premium LTC plan. The additional complexity and confusion caused by combining them makes them less suitable than alternatives for clients. We would prefer to put a package tog ether ourselves.”
Gilbey says: “All three bonds meet the fundamental requirement of providing a good level of LTC protection cover. Indeed, with the exception of a few annoying exclusions on the Scottish Provident product, there is little to choose between them on the level of protection cover offered.The differences between the products are primarily on the added-benefit front. The PPP Healthcare product has a massmarket appeal and is targeted at clients requiring both LTC protection and inheritance tax planning benefits and, for good measure, a return of funds is built into the product for added popular appeal.
“The PPP Healthcare product is clearly a packaged product designed to minimise rejection at the expense of advanced product design and it is difficult to see what advantages it has over the old PPP lifetime care bond other than its simple, easy to present structure.”
Looking at types of marketing opportunities that the PPP Healthcare product provides compared with the others, Bawtree says: “The marketing of this product will not increase the sales of LTC cover, it is just a different way of providing the cover. There is no real distinction between the new product and the existing capital growth option under the Scottish Amicable plan.”
Gilbey says: “As a fee-based adviser, products tend to take a passive role in marketing and are used primarily to meet a need or fill a gap. The gap or need that the PPP Healthcare product fulfils is the dual LTC and estate planning need. It undoubtedly has an appeal if only in terms of familiarity (both for clients and advisers) with the well established onshore life insurance investment bond structure.
“Scottish Amicable has enjoyed some success with its sophisticated product and should continue to do so. The product is a favourite of many IFAs as it is both flexible and clever and allows a number of problems to be addressed within one plan. The bad news, or perhaps the good news, is that it requires a high level of expertise both to construct the plan and explain it to the client. Scottish Provident, on the other hand, has a relatively straightforward product with only a few bells and whistles.”
Turning to the flexibility of the three products, Bawtree says: “Looking at the bond from Axa Sun Life, you have 18 different funds, including a with-profits one, in which to invest, while with Scottish Provident there is just one. With the Scottish Amicable product, however, you have even greater fund choice. There is no extra flexibility on the long-term care element of the plan.”
Gilbey says: “The PPP Health care product is, in rea lity, two products bolted tog ether. It is formed from a LTC cover plan plus a life insurance investment bond protected by decreasing whole-of-life,effectively term, insurance. Although they share the same application form, they are lar gely independent. This gives the product a high degree of apparent flexibility but this is more a clever marketing product extension proposition than an original product idea.
“Undoubtedly, the Scottish Amicable product is the most flexible and complicated of the three products. Its flexibility comes from a clever design and a well thought out proposition. It is presented as, and is, a single product with various components and it is this ability to switch within the product that gives it true flexibility.
“Scottish Provident has the least flexible of the three products. It is, by comparison, a relatively inflexible and simple product with few elements of customer choice.”
Looking at the useful features of the PPP Healthcare product compared with the others, the panel focus on different areas. Evans says: “You can cash in the PPP Healthcare bond without affecting the LTC plan but that is not really a major advantage. The additional up-front cost would probably balance this.
“PPP allows benefits to be paid to the LTC provider or to the client. This is a major plus. PPP Healthcare has a good name for LTC and has the best definition for ADLs. It also provides an excellent care support service.”
Bawtree says: “Obviously, investment choice and performance is important although Scottish Amicable offers an even greater range of funds. Scottish Provident is very limited as it offers only one fund option and not a choice of funds. Single premiums to the PPP long-term care asset protection bond are guaranteed for life for entry after the age of 60, as the plan is reviewed every 10 years until the age of 70 with no further review. This is not the case with the other two companies.”
Gilbey says: “The support provided to claimants, especially at the start of a claim, can be a very important issue. There is much debate as to how best to deliver this service and I personally prefer the insurer to take full responsibility and control of the process. In such a case, the PPP organisation undoubtedly has the strongest offering of the three.”
Examining drawbacks, Bawtree says: “There are no drawbacks to the PPP Healthcare product when compared with the other two, except for the offshore investment element within the Scottish Amicable plan.”
Evans says: “The PPP Healthcare plan is complex and would be difficult to explain to an elderly client. This also applies to the Scottish Amicable product as it has two versions. The Scottish Provident plan is the most straightforward, although the definitions of ADLs are less clear.”
Gilbey says: “The PPP Heal-th care plan lacks the excitement of and the external fund managers of the Scottish Amicable product. Con versely, it also lacks the basic simplicity of the Scottish Provident product. Both the Scottish Amicable and the Scottish Provident products have options to increase benefits by the more realistic average earnings index, as opposed to the retail prices index increases permitted by the PPP Healthcare product. In an ideal world, each company should make both indices available as well as fixed-percentage increases.”
Commenting on the three companies' reputations in the LTC market, Howell says: “LTC is still a relatively new market, certainly to the public, and, as more companies get involved, awareness will imp rove. At the moment, all three companies have good reputations in their historic markets but, although they all have good reputations in the LTC market for IFAs, it will take time to build a reputation with the public in the LTC market.
“In the interim, I would expect their individual repu-tations in their historic sectors to carry them through in those markets.”
Evans thinks PPP Healthcare has a good reputation in the market because it does not decline clients and pays out without difficulty.
Bawtree says: “Scottish Provident is relatively new to this market, while PPP Healthcare is the recognised market leader. Scottish Amicable is a well respected provider.”
Summing up, Gilbey says: “While it is possible to see the attractions of the PPP Healthcare product to some elements of the IFA channel, a cynic might question the motivation behind the product. The mar ket is complex and public confidence in the industry is fragile. There are calls for greater professionalism and care in the giving of advice, especially in this area.
“The PPP Healthcare product is a packaged product designed for popular appeal and overcoming sales resistance. It is emin ently suitable for a direct-sales team or for those looking for quick-fix solutions without the req uired level of expertise and may lead to selling products at the expense of the provision of quality advice. The components of the product are simple and familiar to most advisers and the fear is this might lead some to believe they are instant experts.”