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Protection will go to the ball

Long-term disability insurance, permanent health insurance and income

protection. All three of these descriptions apply to probably the most

undervalued and undersold insurance benefit in the financial services

product portfolio.

When you consider that the first two descriptions have been around the

industry since before England won the World Cup, you could start to believe

the reason for the product&#39s failure to set the world alight must be due to

its affliction with a tag that bears virtually no resemblance to what it is

actually for.

The recent concerted move by the industry to adopt the more Ronseal-like

term of income protection (it does exactly what it says on the tin) may

help push the movers and shakers into reconsidering the value that income

protection can add to the insurance and protection portfolio of the new


But it cannot be solely down to its unfortunate name. After all, it never

did Engelbert Humperdinck any harm. Probably a more significant reason

comes to light when you consider the nature of the distribution channel

that controls the majority of investment and insurance products in the UK.

The traditional approach to the “marketing” of such products has been the

antithesis of customer choice – the emphasis has been on sales-led rather

than demand-driven marketing and distribution strategies by the providers

themselves and the distribution networks they rely on.

The effort needed to make an income protection sale in relation to the

cash return it provides may seem garg-antuan compared with high -premium,

consumer-friendly products such pensions and investments.

But the spectre of regulation continues to hover and this, coupled with

the advent of stakeholder pensions, will mean that the once magic purse of

pension commission will become no more than a piggy bank for the diminutive

(it seems a more sensitive way to put it) income streams that pensions

will generate from October 2001 and Cinderella might finally get to go to

the ball. Income protection is such a sensible option in modern financial

planning that it needs no dressing up to make it work.

As consumer awareness of the need for sensible provision for retirement

contin-ues to increase, so too will the realisation that all these

contributions have to come from somewhere and that somewhere is the money

we earn day in, day out. All that needs to happen is for that income to

stop and so does everything else.

The Government benefit of around £60 a week (and that is before tax) for a

single person after 28 weeks off sick allows for little more than the very

basic existence.

What about having a life? How would an employer feel faced not only with

the moral dilemma of cutting a colleague&#39s income lifeline but also having

to find someone else to replace them in today&#39s competitive labour market?

Income protection offers the ideal employee benefit solution to employers

looking for an invaluable insurance solution that not only helps to attract

and retain good staffbut also protects the company&#39s most valuable asset at

the same time – their employees.

Whether it is a small com-pany for which the moral and financial impact of

long-term illness could be catastrophic or a large and growing company

which needs to protect against the negative financial impacts as well as

manage their absence better, income protection schemes can be tailored to


As the clock continues to count down to stakeholder, the leading insurance

providers should be making strides towards building educational and

information resources to equip IFAs with the tools they need to take

advantage of the huge opportunity that income protection offers.

With 89 per cent of the working population not covered by an income

protection policy, the opportunity really is there for the taking.


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