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Recipe for disaster

Advisers and clients ignore protection at their peril says PruProtect’s Deepak Jobanputra.

Long-term protection planning is an area of financial services that is often overlooked by IFAs and consumers alike but it is one of the most important areas to address.

A simple but powerful positioning of protection can be demonstrated by focusing on consumer outcomes. We have all seen the statistics showing how people are more likely to insure their pets than themselves and most people know someone whose health has had a significant impact o their financial wellbeing. But despite overwhelming evidence, too few people plan their financial futures.

I have come across many IFAs over the years who cited their positive decision to make provision for a client’s
protection needs and for that client to have subsequently made use of the protection.

Think of the adviser who chose not to do the same (such a choice must be explained to the client) and instead focused only on the client’s savings, investment or mortgage needs. The outcome for many will be catastrophically different.

Modern financial advice is no different in principle to that of old – it is not just about comparing products but about the outcomes. It must take into account where customers are at the outset, where they want to get to and how they are going to get there.

From a client perspective, there are probably more exciting sales than protection but the outcome becomes very different when protection is ignored. The impact on the customer and their dependants of these two opposing positions can mean the difference between maintaining a lifestyle and potentially being forced, in extreme cases, into poverty.

This may sound dramatic but there are scores of statistics to prove the point.

A significant proportion of those suffering from serious illnesses are often forced to sell their homes due to the financial impact. Such people can effectively disappear from society.

These situations can be overcome and I urge all intermediaries to review the protection needs of their clients wherever gaps may exist.

Admittedly, the provision of protection can be more difficult in comparison to other forms of financial planning, particularly due to medical underwriting.

However, the issues relating to this have progressed markedly with teleunderwriting and, more recently, tele-claims.

Providers have made great efforts to develop their propositions and render the process as simple as possible. They also offer support to advisers through a number of channels, be it telephone account management, online support and face-to-face account management.

There have also been a number of positive innovations on the product front that offer IFAs the opportunity to revisit their clients with new and up-to-date protection solutions. Many providers are focusing on income protection and severitybased critical illness cover, for example, with great results for customers and advisers. Recent research from Hannover Life Re reveals that severity-based cover is up to 24 per cent more likely to pay a claim than a traditional CI policy.

The opportunity is there and so are the solutions. It is our collective responsibility to take action.

Deepak Jobanputra is actuarial and product director at PruProtect


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. I have been using protection for a number of years, i am now pregenant, can any other readers beat this?

  2. I would be interested to understand the customer experience when claiming under this plan.
    For instance, how do I know what I would be getting for a heart attack? Do I have to haggle with my Consultant?

  3. The definitions use objective recognised medical measures to assess claims. In the case of heart attack PruProtect uses the ABI model wording to define a heart attack and the severity is based on the reduction in the efficiency of the heart to act as a pump. This is measured by reference to the ejection fraction of the heart. The greater the reduction in the ejection fraction, the greater the payment on claim. This provides certainty and objectivity.

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