NDF Administration has entered the protection market because stockmarket uncertainty has affected people's appetite for investment products.
The company has designed home protect, a cafeteria style protection package that brings together a range of protection products from other companies. Prudential was chosen to provide term assurance, critical illness cover, plus the sickness and accident element of mortgage payment protection insurance. The unemployment element of mortgage payment protection insurance is provided by Hamiltons, while buildings and contents insurance is provided by Teachers Assurance. A condition of the product is that at least £10,000 of life cover must be taken out alongside any other element chosen by policyholders.
IFAs think NDF Administration may be taking the packaged product route as a launch pad to the protection market. They say the protection market is very premium-driven, but cafeteria-style products are difficult to compare on this basis. As a result of this, IFAs may be more likely to put together their own package of protection products for clients after comparing prices on quotations systems like The Exchange.
A 30-year-old non-smoking male requiring standalone critical illness cover on a £100,000 sum assured over a 25-year term would pay £13.03 with NDF in the first year but premiums increase almost every year during the term.
IFA Guy Jones of Berwick Devoil Healthcare likes the concept of home protect and thinks its critical illness premiums are initially cheap. But he thinks it is expensive in the later years. For example, the monthly premium for year 25 would be £45.73 based on current rates.
The same cover on the same basis would currently cost £25.17 a month with Scottish Provident, but premiums would not fluctuate annually. For clients who do not need the £10,000 life cover, premiums would reduce to £23.45.