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Peter Le Beau: Time for a new protection product?

One should never really look at the comments that pile up under articles published online but it is very hard not to read them!

My last article for Money Marketing divided the industry quite firmly down the middle with several people writing in praise and others commenting, usually anonymously, that I am the worst thing to happen to the protection industry in recent memory.

What upset some readers was that I had criticised the value of trying to breathe life into a CI product that is awesomely complicated when they ignore Income protection which very often is more appropriate anyway.

A lot of people spring to the defence of CI as if it is a personal friend. I understand this.I would consider IP to be a dear friend and one that I would invite to a family wedding. I was merely trying to point out that there might be a product –aside from a menu plan- that could provide a more flexible option.

One critic accused me of “smoke and mirrors”, a delightfully evocative phrase, because I did not outline such a product in detail.

Sadly one only gets a few hundred words to sum up a situation and devise a solution so I will claim that my brevity was necessary rather than a deceit to fool my audience.

Let me share the unformed thinking that I have been doing with you. One of my favourite all-time products, not just a friend but someone I would go on a short holiday to the Scilly Isles with, is family income benefit. It has been sadly undersold. I like it because it provides income in the key years after the death of a breadwinner and you have the commutation option if you need a lump sum.

Could we combine a life and disability income benefit where someone unable to work could receive an income and – this is where it becomes exciting in an almost Hitchcockian way! – a lump sum as well by commuting part of the income benefit if the condition appears to be longstanding and serious.

Now I am well aware of TPD (and its uglier cousin PTD). I would talk to them at a cocktail party at a friends house but would not invite them over my threshold.

They have caused the industry a lot of grief and we need to avoid this guess at permanence which is the problem.

Maybe we pay a reduced income benefit if the client is off work and add a lump sum if the insured suffers a specified illness. Perhaps the ratio between these could be varied according to circumstances at claim time?

It is an idea rather than being completely smoke and mirrors and I think I like the broad concept.

At this stage I might give this product some mulled wine if it came carol singing and maybe even a mince pie. It is some way off being invited to have Christmas dinner with the family but who knows where our friendship might lead?

Peter Le Beau is managing director of Le Beau Visage

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. I’m not sure I would invite Peter Le Beau to any social occasion, because he would bring all his analogies with them and they would take up all the space on the sofas.

  2. The man makes a lot of sense, in the new year I am going to “sell” IP to any and everyone who has none and needs it.

    That is, if the FSA don’t bring in further qualifications for IFAs to pass before they can sell protection products.

    Oh Sorry! I forgot, the RO5 is such a qualification, but not eligible for Diploma credits Who could have envisaged a regulator who did not put protection as a fundamental part of the Diploma, when this whole industry was born on the back of it.

    Beats me.!

  3. Hmmm, severity based cover. I think you’re on to something Peter!

  4. The Grey Defector 4th December 2012 at 10:02 am

    Well, we have severity based regulation and that’s worked………hasn’t it?

  5. Like Peter I think Family Income benefit is a very good (but rare) product and I agree TPD being replaced by an amended IPP would be good if it could be more similar to FIB.
    I’ve got R05, filled in my level 4 diploma points with these at certificate level.

  6. Ignore my ignorance – but how is family income benefit a good product?

    Yes it is cheaper, and pays a monthly income – but if you die in the last few years of the policy you hardly get any money.

    If you die in the first couple of years its brilliant – but a level term would be much better as you would have a massive lump sum if it was the 1st or last day you died.

    IP is amazing – love that product! Its massively undersold and needed more often than anything else we sell in protection!

  7. “Maybe we pay a reduced income benefit if the client is off work and add a lump sum if the insured suffers a specified illness”……….

    Sounds a lot like Ageas’s Real Life Cover, however, unless I’m out of the loop, this doesn’t really seem to have taken off as well as it should have. Pity, because it can cover all causes of financial destitution and once the product is understood it’s a very simple concept.

    Also, why does the industry need additional products when there are menu plans? Provided the distributors (us) know how to effectively use them they will always offer more flexibility than a single fixed product. I only see a new product being of value to those not offering advice or direct to consumer propositions.

    What the industry really needs is advisers who know the products inside out (within reason, we are not medical experts after all) and who are able to effectively communicate the benefits of those products to their clients.

  8. @ Simon Moore – We arrange most FIB to run until the child leaves higher education. They need maximum cover while they are young, but often can’t afford enough level term on day one, becuase they are paying for cover they might not actually need later in life. With FIB they are only paying for what they need. We’ll often have a mixture of FIB and whole of life.
    I carry out regular reviews with my clients (not customers) of their protection needs and invariably once teh child is 15 or 16, we find that the need has chanegd drastically and the cost of the cover is compared to the need and quite often LAPSED or replaced and the whole of life maintained only.
    so I agree with you if you die in the last few years, it’s a waste of money and as a result I actively encourage clients to cancel the plan in the last 2 years PROVIDED they are still healthy. anyone who pays the last months premium on a FIB has go to be off their trolly if they are healthy!

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