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Protection prize

Protection continues to be one of the fastest-growing areas of the life and pension market and one where e-commerce is having the greatest impact.

The process for underwriting protection business becomes ever more automated but menu-based products do not lend themselves easily to comparative quotations.

The various major portals have all tried to address this issue but, in my opinion, none of them has produced anything approaching the functionality of the Intelligent Protection software from Direct Life & Pensions.

Originally launched at the beginning of 2006, the system allows both specialist protection advisers and those who might be supplying the advice as part of a wider sale process, such as a mortgage, to provide clients with comparative menu-based quotations for a range of cover quickly and efficiently.

Using a series of web-based screens, the adviser captures the client’s background details and priorities before proceeding to identify the amount of budget the client is prepared to spend.

The extent of the data captured can be varied by the adviser who can choose between a very limited factfind all the way to a more detailed income and expenditure forecast.

In my view, where the system really wins is that the customer is agreeing with the adviser how much they want to spend rather than the adviser quoting a premium that basically shows how little the client might need to pay.

The results are presented identifying the maximum level of cover that can be delivered within the identified budget and also how much it would cost to offer the next level of benefit allowing the adviser the opportunity to upsell.

For example, a client aged 28 taking out a mortgage of £150,000 might set a budget of £45 pear month. The system will identify the life and critical-illness cover that can be delivered for £24.97 a month but if they spend £47.09, benefits could be extended to include income protection benefit of £930 a month.

The practical effect of presenting the options in this way is that advisers are able to sell considerably more products.

One major user, Alexander Hall, attributes the use of Intelligent Protection to increasing the level of protection premiums written by their advisers by 60 per cent once the system was implemented.

It is no surprise that an increasing number of significant mortgage advisers, including John Charcol, Cobalt Capital and Alexander Hall, are using the system at the core of their protection advice process.

Ten providers are represented on the system, although not all are able to offer the full range of menu options. Over the last 12 months, Friends Provident has extended its integration to include its highly popular income protection plan. Axa is adding its flexible protection plan which can include a full range of menu cover, except family income benefit. I understand that two further insurers are negotiating to add their products this year.

Having presented the results and agreed with the client on the cover required, the system automatically generates a suitability letter. A key part of the Direct Life & Pensions’ proposition is that the adviser needs only to complete details of the cover required on the appli-cation, with all medical information captured by Direct Life & Pensions’ express underwriting team.

Direct Life & Pensions also arranges for any trust forms to be issued by the provider once the policy is in force.

When the service was launched last year, ironically, the one thing that you could not do with such an advanced e-commerce service was to apply online. This has now been addressed for major accounts and this feature will be extended to all Intelligent Protection users during this month.

Any information already entered into the system – the product details – are pre-populated to a shortened application. The only exceptions to this are the client name and date of birth. For an otherwise excellent system, this does seem to be an obvious omission.

Where the client gives an email address, copies of all documents will be delivered in this way. Direct Life & Pensions encourages advisers to enter their email address at this point so that copies of all the documents, including a copy of the application, key features and personalised illustration will be forwarded to them.

The adviser can then add the suitability letter and their own IDD document if appropriate and forward all the documents to the client electronically.

From the next release of the system this quarter, the adviser will be able to access Direct Life & Pensions’ underwriting admin system to agree a convenient time with the client for the express underwriting staff to call. In the meantime, users can indicate a preference for a morning, afternoon or evening call.

The client’s address is automatically generated based on the postcode entered. Marital and occupational status are also entered as well as whether the contract is required for a mortgage or in trust.

Finally, the adviser enters the direct-debit details and confirms its own agency information and submits the case for processing.

The software itself is available for £19.95 a month for up to three users. Where the express underwriting service is used, business is processed via Direct Life and Pensions agencies.

Because of the extent of the additional commission Direct Life & Pensions has negotiated, most advisers will not notice any significant variation in the initial commission but no renewal commission is payable. Where one application or more a month is submitted, the monthly software licence fee is waived.

It should also be recognised that, as part of its express underwriting, Direct Life & Pensions addresses all the medical underwriting with the client, which removes any potential non-disclosure risk from the introducing adviser.

Given consumers’ tendency to look to blame anyone but themselves in the event of non-disclosure and what one might politely describe as the erratic behaviour of the Financial Ombudsman Service, this is no small additional benefit to the adviser.

Given the considerable ease that the system offers, which should enable advisers to sell far more protection products than they might normally achieve, many advisers, will I am sure, see foregoing renewal commission as an acceptable price for increasing their initial income, especially if the protection advice has to be fitted quickly into a wider mortgage sale.

Alternatively advisers simply wanting to use the quotation and illustration software can simply pay the £19.95 a month with no commission-share and submit their own applications direct to insurers.

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