View more on these topics

Neil McCarthy: We need to put some distance between IP and PPI

Neil-McCarthy-MM-Peach-700.jpg

Many readers who have worked in the industry for “a good few years” will remember the Sargent v GRE (UK) Ltd case back in the late 1990s.

Sargent had “any occupation” cover and suffered a serious hand injury. He thought that the term any occupation in his income protection policy meant that if, as a result of his accident, there was any occupation that he was now physically incapable of doing, even if this was an occupation for which he had received no training or shown no previous aptitude (such as being a concert pianist), then he should receive the benefit.

The insurer argued the benefit was payable only if the injury meant that  Sargent was now unable to undertake any occupation at all. And since Sargent was still able to do some manual labour, even though this was at a less skilled level than the work he had done before the accident, the insurer said he was not entitled to any benefit.

The Court of Appeal found unanimously in favour of Sargent, stating: “The potential width of the expression any occupation is circumscribed by its context and implicitly limited to any relevant occupation”. In plain English the Court of Appeal said that the term any occupation was ambiguous, so it should be interpreted in favour of the policyholder rather than the insurer.

There has been an almost universal switch by protection providers to the own occupation definition and, while this is both sensible and understandable for the consumer, it has created issues for advisers as own occupation can mean different things to different insurers – particularly now as many do not offer an own occupation definition throughout the claim.

Advisers now have to review their recommendations against the premium charged by the providers, the definition of own occupation available and possibly a secondary level of disability definition once the 12-month own occupation is passed.

Until recently, this meant an arduous process of researching all the insurers’ full illustrations and key features in order to find and detail the own occupation definition – a process not dissimilar to that faced by advisers wanting to multi-app, as to do this manually is horrendously time consuming.

More recently, technology has eased this process by providing advisers with greater understanding of the actual definitions offered within the insurers’ products ensuring that the definition shown when they conduct their research is the complete definition their customer will receive, should they need to claim.

All this is good news and income protection, as every adviser knows, should be the cornerstone of most people’s protection needs. In recent years, the confusion with PPI has undermined many customers faith in the concept and in a wholly inaccurate way.

While redress for selling products that purported to do something that they did not has financially helped clients, the industry failed to take the opportunity to clarify and convey the fact that income protection remains a core financial need and that there are a plethora of products that are fit for purpose, competitively priced and have the flexibility to suit most needs.

Neil McCarthy is sales & marketing director at Direct Life & Pension Services

Recommended

2014-George-Osborne-Holds-Budget-Box-700.jpg
2

Treasury waives annuity rules to resolve tax-free cash confusion

The Treasury has waived the requirement for pension savers to buy an annuity within six months of taking their tax-free lump sum after criticism from insurers. It is an interim measure to ensure anyone who has taken their lump sum but not annuitised can still access greater pensions flexibility next year. However, annuity providers remain […]

Protection Brief: CI Expert: Rebroking is not churning

Many compliance officers, indeed many advisers, consider rebroking a critical-illness plan to be dangerous, perhaps even tantamount to churning. This view frequently colours their thinking and often results in older plans being retained even though a higher level of protection could be obtained using currently available plans. It can be argued that advisers who fail […]

Cash-Money-Currency-700.jpg
3

Fidelity lobbies FCA to ban exit fees

Fidelity is lobbying the FCA to ban charges for transferring assets off investment platforms. Exit fees are typically charged on direct platforms. Hargreaves Lansdown and AJ Bell’s D2C platforms both charge £25 per line of stock to re-reg off platform, while Alliance Trust Savings charges £100 to re-reg away from the platform. Both Fidelity and ATS offer […]

2014-Budget-Box-George-Osborne-Distanced-700.jpg

The stamp duty reform that got away

Ahead of the Budget last week, the Financial Times reported George Osborne was considering a new stamp duty band of 2 per cent on homes worth between £250,000 and £300,000 due to concerns about the sharp jump from 1 per cent to 3 per cent at £250,000 leading to many homes being under-priced. Many in the […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com