Ross Jackson, Senior Protection Marketing Manager, Royal London
The Insurance Distribution Directive (IDD) requires you to obtain specific information about your clients’ insurance demands and needs and to map these to products on offer. This means you have to carry out a robust analysis of what’s available so you can be confident your recommendation is in line with your client’s requirements.
Last month I wrote about the requirements introduced by the IDD. Here I’ll talk more about the customer demands and needs requirement and key points to consider when making a protection recommendation.
Tailoring a protection plan
At Royal London, we understand that all your clients are unique. You need protection solutions that are flexible and aren’t ‘one size fits all.’ When carrying out your product research and determining a shortlist, you’ll want to make sure the product options available give your clients choice.
Let’s start with risk. The biggest risk your clients face during their working life is being off work due to illness or injury. Using the risk summary report from our marketing studio, I established that I have a 23% chance of being off work for two months or more in my working life, yet only an 11% chance of getting a critical illness, and a thankfully much smaller 3% chance of dying1. But life cover and critical illness sales outstrip income protection by some margin. Of course income protection might not be appropriate for every client, but running this simple report is a great way to encourage them to think about their needs. If they’ve just taken out a big mortgage, the natural instinct is to protect that large debt in case they die. But what if they couldn’t work? How would they pay their mortgage and other outgoings each month? That’s where income protection can help, though you’ll need to factor in employer sick pay arrangements and any other benefits they might be entitled to.
Affordability could be an issue here – it’s true income protection can be more expensive than other covers. But many providers have enhanced their income protection plans to make them more flexible and affordable. For example, we recently introduced a five year payment period, meaning clients can choose from three short-term payment periods (we also offer one year and two years), which brings the cost down significantly compared to full term.
And while income protection is primarily designed to pay out a regular income if your client can’t work through illness or injury, some plans also include fracture cover and other benefits. Certain providers (including Royal London) offer this at no additional cost and include it in their plans automatically while others offer the benefit as an add-on with an additional monthly premium applied. Broken bones could mean weeks off work, so fracture cover can be a valuable addition. We also include hospitalisation benefit as standard with our Income Protection.
Considering more than price
Once you’ve established different options, it’s time to look beyond price and consider the product benefits in more detail. But with so many products available this can be time-consuming. Fortunately, there are tools to help, such as CI Expert, which lets you compare critical illness plans based on the statistical likelihood of making a claim. After all, that’s the most important thing when it comes to critical illness cover and why we focus on having some of the best cover for the critical illnesses your clients are most likely to claim on.
F&TRC’s Quality Analyser is another comparison tool which covers life protection, mortgage protection, income protection and family income benefit. Our Business Support Unit can help you navigate these systems to make sure they work to your business model, so you can achieve the best results for your clients.
Looking after your clients’ wellbeing
Another area to consider is value-added services. Many providers include these within their plans automatically, as we do with our Helping Hand service. This offers tailored practical and emotional support to customers and their families (partner and children) during difficult times. If you recommend any advised Royal London protection plan, your clients get access to a dedicated nurse who can provide support, as well as access to specialist services to help with bereavement and illnesses such as cancer. So even if your client only takes out Life Cover with us, they still get the support of a dedicated nurse if they need it. Our customers often tell us this service is more valuable to them than any financial payout. And it’s available from the day the plan starts, not just at claim. How many of your clients would see the benefit of having this sort of service available with their protection plan?
Plan flexibility is something else to consider. While that young couple who’ve just bought their first house might not need children’s critical illness cover right now, in the near future they might be thinking about having a family. So if you’re recommending critical illness cover to them it’s worth considering plans that offer the ability to add children’s cover at a later date. Our own Critical Illness Cover offers three options: no Children’s Critical Illness Cover, Standard Children’s Critical Illness Cover and Enhanced Children’s Critical Illness Cover. Your clients can add this at any time without giving us any medical information.
What suits your client today might not be what they need in the future, so make sure any plan you recommend is flexible enough to adapt with them. You might also want to consider features such as lifestyle reviews (which offer the opportunity to reduce premiums if your client changes their lifestyle e.g. giving up smoking) and cover increase options (which allow your client to increase their cover without medical evidence at certain life events e.g. getting married).
The customer demands and needs requirements of the IDD is ultimately about making sure the products your clients take out are consistent with their unique demands and needs. So when you’re recommending a protection plan, make sure you consider the various product benefits and options on offer, as well as the price.
Find out more about our protection products.
1 Royal London Risk Summary Report. Based on a non-smoking male aged 44 next birthday with a retirement age of 65.