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Pioneer takes pure and simple approach

PIONEER FRIENDLY SOCIETY

PURE PROTECTION

Type: Income protection

Minimum benefit/minimum premium: £78/£1.53 a month

Minimum-maximum ages: 16-59

Deferred periods: 1 day, 1, 4, 8, 13, 26, 52 weeks

Charges: None

Definition of disability: Own occupation

Commission: Initial 130% of Lautro, annual 2.5%

Tel: 01225 752140

The panel: Kevin Carr, Senior technical adviser, LifeSearch,
Neil Franklin, Partner, Franklin&#39s Financial Services,
Alan Lakey, Partner, Highclere Financial Services,
Malcolm Mitchell, Joint managing director, Plan Insure

Broker ratings:
Suitability to market 7.8
Company&#39s reputation 5.0
Premium rates 6.0
Flexibility 6.5
Commission 6.8
Product literature 7.3

Pure protection is an income protection plan from Pioneer Friendly Society that does not base premium rates on smoking status, sex or occupation.

Considering how the plan fits into the market Mitchell says: “The plan is aimed squarely at the class three and four end of the market and in particular for the trades and self-employed individuals. The plan is unusual in offering short deferred periods, which are ideal for many manual occupations.” Lakey says: “With the demise of so many excellent competitors such as Royal & SunAlliance, Swiss Life and Zurich Life, this plan should find a significant niche in the market.”

Carr says: “Income protection is undersold across the board in the UK. I suspect there are around three million policies in force. However, that is only about one in 10 of the working population. Any product that provides alternative solutions to redressing the income protection gap should prove useful. This policy is aimed at making income replacement more accessible and more affordable.”

Highlighting the type of client the plan could suit Carr says: “As there is no premium differentiation for smokers, gender or occupation, those who would traditionally pay higher premiums for income protection, such as smokers and manual workers, could benefit.”

Mitchell says: “It is suitable for class three and four occupations and for women bearing in mind the same rates are offered to both males and females. All occupations are offered at the same rate so this will tend to favour class three and class four occupations.” Lakey says: “Truck-driving female smokers. In fact most manual workers, women and smokers.” Franklin says: “It is especially suitable for blue-collar workers, women, smokers and those wanting cover from day one.”

Assessing the plan&#39s marketing potential Mitchell says: “The plan will be an ideal door opener for many class three and four occupations and will give IFAs an opportunity to discuss income protection with people who previously would not have been interested due to the lengthy deferred periods. Specific marketing could be directed towards women.” Carr says: “IFAs would be able to revisit clients where income protection had previously been considered too expensive because of their gender, occupation and smoking habits.”

Next, the panel draw attention to the product&#39s positive features. Lakey says: “The day one cover and the ability to insure 65 per cent of pre-illness income. Own occupation cover is available for virtually all occupations which is a bonus.” Franklin says: “Day one cover is available and it can cover periods abroad. There is one premium rate for almost all occupations and no smoker loading. It offers 65 per cent of income and there is no loading for women.”

Mitchell says: “Once again, the short deferred periods mark the contract out as unusual together with the unisex rates. The ability to provide cover for class three and class four occupations potentially from day one mean this contract will be attractive to a client who requires replacement income after a short period of time.”

Carr says: “The fact that everyone attracts the own occupation definition for the first 52 weeks of incapacity regardless of occupation is a good feature. Many of the people targeted by this plan are likely to be those in manual occupations who would normally get activities of daily work (ADWs) which is a more restrictive definition of incapacity.”

Next the panel discuss the plan&#39s flexibility. Lakey says: “It is extremely flexible with regards to benefits and premiums.” Franklin disagrees and thinks it isn&#39t great. Carr says: “The range of deferred options are excellent, especially day one cover, and once the plan is up and running it is possible to adjust the benefits to match changes in circumstances.”

Mitchell says: “The plan offers the ability to index link cover as well as automatic waiver of premium benefit. The plan has a relatively low maximum benefit of £3,120 a month, which could restrict the flexibility provided for some higher earning policyholders.”

Discussing the plan&#39s disadvantages Mitchell says: “The main disadvantage of the plan is that premium rates are both reviewable and increasing in line with age. For example, this results in premium rates almost doubling between the ages of 40 and 50 for a four-week deferred contract.”

Carr says: “The plan will be expensive for younger, non-smoking workers in more professional occupations. Premiums also rise with age and can be reviewed on actuarial advice &#45 hence the premiums are not guaranteed, which is a notable flaw. There are also several exclusions such as war and terrorism, self-inflicted injury and future hobbies. While some of these may seem acceptable, there are providers who offer guaranteed rates and do not have any standard exclusions.”

Lakey says: “Primarily the three month initial claims moratorium which also extends to non-indexation increases. Some clients will not appreciate the annual age-related premium increases.” Franklin says: “It is not the cheapest and the quotes in per week are difficult to understand.”
Evaluating the company&#39s reputation, the panel agree that most IFAs and the general public are unlikely to have heard of it.

The panel are asked to name the likely competitors for the plan and cite Liverpool Victoria, Friends Provident, Holloway Friendly Society, Children&#39s Mutual, Norwich Union, Scottish Equitable, Scottish Provident and Bright Grey.

On the topic of premiums, Carr says: “Initially they are competitive for slightly higher-risk smokers and manual workers but the fact that premiums are not guaranteed is a concern. I would more comfortable with a guaranteed plan even though it may be slightly more expensive.”

Mitchell says: “The premium rates are competitive with the proviso that they are an increasing cost.” Lakey thinks they are attractive for smokers and higher-risk occupations. Franklin says: “The premiums are not the cheapest in some circumstances but for the right person they are fine.”

Discussing the plan&#39s own occupation definition of incapacity, Carr says: “It is available to all policyholders for the first year of a claim, which is very good. It then switches to a suited definition which for manual occupations is still better than the normal ADW definition.” Lakey says: “This is not only excellent but arguably essential for all occupations.”
Mitchell says: “It is essential to have this definition of incapacity but this is not particularly unusual within the market place so this does not really give Pioneer a competitive edge one way or the other.”

The panel agree that the commission is reasonable.

Casting an eye over the product literature .” Franklin says: “It&#39s boring and too wordy. There are not enough pictures &#45 the examples would benefit from a picture of the person who claimed. It is also heavy and will cost a lot to post.”

Lakey thinks the product literature is extremely comprehensive and clearly stated. Mitchell says: “The product literature is clean, fresh and not overly fussy. The key features documentation answers all questions simply and concisely. Overall, the impression is given of a modern product.” Carr says: “The text is quite clear and concise although, as with pretty much all income protection contracts, clients will need help with some of the translations. I must say that I find the colour scheme appalling – it reminds me of how toothpaste looked in the 1970s.”

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