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Peter Le Beau: Protection providers racing the wrong way

What a summer that was. Not the weather, of course, I meant the sport, in particular the races.

I was lucky enough to be in the stadium when Mo Farah won his second gold and we also had Jess and Bradley and Laura, Sir Chris, The Weirwolf and Ellie.

I like a good race but sadly I think the industry is involving itself in the silliest race I have seen for a very long time.

You have probably guessed by now that I am referring to the “conditions race”. What a ridiculous and fatuous race that is and what a disservice it does to our industry.

There are people straining to add a scintilla of value just to look different from their competitors. When lots of competitors try this, the result is mayhem.

I will not detail the way this race developed. I have long thought the ABI has done some very good work to shore up and reposition the product but it is a tough task when the marketing focus on critical illness has moved in the direction it has in the last few years.

I remember lugging a huge briefcase full of overhead slides around South Africa in 1994 showing how we had “developed” critical illness. Most people I spoke to were incredulous and saw it as a descent down a very slippery slope.

The South African response was tiered products which have slowly won adherents in the UK and are an honest attempt to make a bit more sense of the product.

But sadly, critical illness, which is designed to provide cover against serious illness for those at work but which does not cover the two most important conditions you are likely to suffer from has never represented the best option for people wanting cover against disability. It certainly does not offer the best option now and the fact that it outsells IP by five to one despite the huge problems it faces says a awful lot about wrong priorities in our assessment of client need.

This might be deemed to be a trifle controversial and, frankly, I am rather hoping it is.

I am not saying that people do not need critical illness. It is a great help to liquidate liabilities with lump sums when you become ill and it is a product that has increased appeal to single people.

But frankly the complexity of definitions has become almost laughable and we have to find a better way to cover a lot of the people who bought it. You probably expect me to say that product is income protection but maybe it is a product that incorporates the best features of both CI and IP.

Menu products have done this quite successfully but maybe we could take this thinking futher. Certainly, in a year of great races, I cannot help feeling that the conditions race is taking us down entirely the wrong track.

Peter Le Beau is managing director of Le Beau Visage

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Comments

There are 21 comments at the moment, we would love to hear your opinion too.

  1. Smoke and Mirrors Peter.

    Are you an illusionist or a journalist?

    You are dancing around the handbag here. What are the 2 areas that people are likely to suffer from that arent covered by a critical illness policy?

    “You probably expect me to say that product is income protection but maybe it is a product that incorporates the best features of both CI and IP”

    Well what is the product then? You do not tell us? To say that Menu products are a new type of product is not true, it is two+ products together so I am confused…. What is this new, revolutionary product you speak of…. please share.

  2. Ps. What on earth has a race/olympics got to do with protection…..Im sorry but this is a totally absurd analogy…

  3. I totally agree. I have always viewed CIC as an umbrella with holes. Income protection should, I believe, always be the front-line defence against illness with CIC being a luxury product for those who can afford both. Of course, CIC is a much easier sale, especially when the salesperson starts explaining how CIC can defend against cancer (deliberately putting forward the subconscious suggestion that it can prevent cancer rather than pay out a sum of money in the event of being diagnosed with cancer). I know that there have been many people who have benefitted from buying CIC but for many of those people income protection would have been a better choice.

  4. Bobby, the team at the Protection Review are running a series of Income Protection workshops, given your comments, suggest you call Kevin Carr and book yourself a place on one.

    Peter, quite agree, time to take simpler IP products to market…ABI++++ is to Ci what Prog was to rock.. in the end, irrelevant to its audience…time protection got punk and changed direction!

  5. Surely the heading should have been “brokers racing the wrong way”, as surely it is down to us as the professional advisers to be recommending the most appropriate products?

    Of course, each provider is going to constantly try and improve their proposition with ever increasing number of illnesses and improved definitions, it’s only natural when trying to win market share.

    Personally, I feel that some of the improvements in recent times of providers chasing ABI+ definitions rather than simply adding conditions is a real plus. Whilst many of these definitions may not mean much to the consumer they should to those tasked with selling the products. I for one am happy explaining the difference between “loss of limbS” and “loss of a single limb” to a consumer, as well as numerous other ABI+ definitions which improve a proposition.

    That said, I agree that income protection is a far more suitable product in many instances.

  6. @ Anon 3.53pm

    Thanks for your input but this still doesnt answer any of the areas I questioned and certainly doesnt explain the terrible comparison.

    I never said that I prefer CI to IP or vice versa, both have benefits in any given situation. I said this article raised more questions than it offered in terms of progression.

    Given the tone of your repsonse I suggest you stick to the coversation at hand and mind your own business about my CPD.

  7. Another useful article from somebody who has not been a regulated IFA (FSA Website) post 2001.
    Bobby – musculoskeletal and Mental health are the top PHI claims, TPD maybe the only CIC condition but you would have some fight on your hand to get a payout.
    Peter – Protection Review Like your attempt at IPTF have no credability left. If you look at the sponsors you will see most of the Protection providers are not listed so, Do they believe in in the messages, training advice that they provide. NO. Leave the protection industry to the IFA’s who are qualified to advise and let them speak to the experts (Providers) who can offer the training at no cost.

  8. Bobby – I was just saying……

    But anyway, seriously, are you actually expecting us to believe that you, as a professional adviser, really do not know what the two conditions are that people are most likely to suffer from, and which are not covered? I think that possibly you need to re-read the article and really think about it, and then I’m sure (or at least I hope) that it will hit you. Please post again when you have really put some thought into it.

  9. p.s. What on earth has dancing around the handbag got to do with protection…..Im sorry but this is a totally absurd analogy…

  10. Great article well done.

    Lets drop all the silly analogies as without this kind of thought leadership we are in danger of falling between two sticky wickets in the bush!

  11. My analogy was subtle dig at the analogy that was used in the article. Maybe to subtle for you though anon. 🙂

  12. I’m disappointed to see Peter’s knowledge and credibility attacked in this way…poor show.

    Peter is right in that IP is often better for many clients than CIC. As IP is more likely to pay out it should generally be the first option to be considered. Taking out both is of course the ideal but not everyone can afford it.

    To answer a question above, there are specialist products currently available that can meet the needs of clients who are attracted by the CIC lump sum but who can’t afford to take out IP too. Ageas has Real Life Cover, and Zurich has a CI/IP hybrid plan. Both naturally have limitations, but for clients on a budget they do give a greater chance of claiming for sickess/disability than just taking out CIC.

    Pru’s Serious Illness Cover is another alternative for those who can’t/won’t take out both; it’s not IP but it also gives clients a better chance of claiming than a standard CI plan.

    Product development can help, but intermediaries can have a much greater impact on ensuring people are adequately protected by talking to clients about products they are most likely to claim on, not the ones that are most attractive or simple to sell.

  13. I thought it was a really good blog, but then again I’m probably bias as I work with Peter at Protection Review, which has 30+ sponsors including most UK life offices and reinsurers. I’m also an ex-adviser who runs protection training for advisers alongside the PFS.
    Good debate!

  14. Many thanks to the voices of reason who have added to this debate. I’d love to solve the problems of the world in a single 450 word blog but you do have to leave things out but Emma has very eloquently underlined some potential solutions and others might lay tantalisingly out there if we brainstorm intelligently enough about them. As to the credibility of the Protection Review and IPTF I will let the industry be the judge rather than an anonymous blogger but at least they are trying constructively to improve the way we do things in the industry.

  15. Anon #1. – I cannot answer you on that one because it was the other anonymous who posted the comment not me.

    Anon #2. – That could well be the case but product development has a long way to go before we reach that stage.

    Anonymous #1. – Spot on.

    Have you noticed that Bobby has gone very quiet.

    See you anon .

  16. So, what we want is a CI product that pays out for the main IP claim causes?

    A lump sum IP product then?
    “Been too ill to work for 6 months? Here’s some money!”

    Problem solved. You’re welcome.

  17. A lump sum IP product then?
    “Been too ill to work for 6 months? Here’s some money!”

    In other words Capital Option….OK 6 months is a bit quick but it’s along those lines.

    These products exist just perhaps not in the individual market. Rarely do these articles or comments ever discuss all the options available via Group policies which if employees had a greater awareness of (and advisers seem to pride themselves that they give awareness) perhaps more employees would influence their employers to take out the benefits. Result: More options for cover (often higher cover and with free cover avoiding exclusions that may exist for an individual) at an overall lower cost.

    But No, never a word. Because the individual won’t be the one taking out the product and therefore no commission or fee to collect?

    Not saying it’s always the right solution (Group products are not portable after all) but it just seems to be missing from any of these debates.

    Before I get lambasted I’m not a professional adviser just an interested party making a comment.

  18. Dare I suggest that one of the main reasons why IP is under-purchased compared to CI is that everybody is eligible for CI whereas the restrictive terms of IP mean that not everybody is eligible and even then the planholder cannot be certain that the agreed level of income will be paid.

    If a provider is brave enough to move away from the income-assessed payment (and I mean more than the £12,000 p.a. paid by Exeter) and also offers ‘own occ’ and also offers low cost but increasing premiums then we are close to the mark.

    So…who’s brave enough to develop this?

  19. The issue with IP vs CIC in the eyes of the buyer is perceived value. Most will approach each product by comparing the monthly cost and the payout. At the basic level of perception a CIC payout looks like winning the lottery compared to IP. Hence why IP never has and probably never will take off in it’s current form. Offer a lump sum life policy vs family income benefit and most people will tend to choose the former for similar reasons.
    A combined IP/CIC product might work, giving an option of either income or lump sum payments (would probably have to be partial payments similar to Pru SiC). I’ll leave the boffins to work out the feasibility of such a product.

  20. So…who’s brave enough to develop this?

    Alan, the answer is in the post above yours. The group market offers age related costs, everyone in, with next to no underwriting. It’s just that the people advising on group products tend to be more worried about getting big commissions from pensions consulting than they are about employees needs.

  21. Income protection is a product that should in reality be looked at before critical illness……but

    Dare I sat that until recently, the commissions paid on these products were lower than critical illness and therefore not as attractive to intermediaries

    Dare I say that by recommending income protection rather than critical illness, it infers that a regular relationship has to be set up with the client rather than bag the commission and move onto the next one

    Dare I say that as it can take longer to place an income protection policy than a critical illness one that netowork cash flows can be impacted and therefore the product is not promoted as much

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