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Standing innovation

Protection products are like buses, you wait for ages and then three come along at once, says industry guru Peter Le Beau about the recent spate of innovative products.

The latest product to get advisers talking is Real Life Cover, born out of a collaboration between Lifesearch and Fortis. It combines seven different types of cover, including life and income protection, with the option of unemployment cover.

The product is designed for people who fall into the £2.3 trillion life insur- ance gap.

CBK, Highclere Financial Services and Master Adviser are three of the first adviser firms to offer the product. CBK principal Peter Chadborn says he welcomes any new product, particularly if it is very different to other existing products as it gives advisers something positive to tell their clients.atHe says: “This is targeted at those people who would traditionally only want to consider life cover so it seems to be an ideal solution. It is good value for what it is.”

But he warns that it should not be recommended ahead of comprehensive income protection and critical- illness cover because it has limited benefits.

He says ideally it would be offered to a client as a fall-back solution if they are unable to afford comprehensive cover and says it will be particularly useful for mortgage brokers looking to sell protection alongside a mortgage.

Another product launched this year is income protection from LV=, designed to replace mortgage payment protection insurance.

It pays out until the policyholder goes back to work, the plan term ends or the policyholder dies. It has guaranteed premiums and bases disability definitions on own occupation and the policyholder can claim as often as necessary.

It offers cover for accident, sickness and unemployment, with level mortgage payment protection and the choice of level or index-linked living expenses protection.

Le Beau says LV= should be applauded for bringing out this product and says the addition of unemployment cover to income protection products is something he has thought should happen for a long-time.

But he says: “There is an issue over whether people will understand these new products. Even some really good intermediaries will not know about income protection so there does need to be a certain amount of adviser education as well.”

Le Beau says he would prefer consumers to take out partial cover rather than no cover and these two new products will encourage more consumers. He says the credit crunch makes it difficult for advisers to sell their usual range so protection comes into its own.

PruProtect CEO Sammy Rubin says: “People go back to the basics in times of recession. They look at the found-ation of all financial products, which is having the right protection. They start to think about what would happen if they lose their job.”

Rubin believes it will take time for the new products to filter through to the public and for innovation in the market to translate into a rise in sales. But he is hopeful that the current market conditions combined with new products will lead to a rise in business sales over the next couple of years.

Rubin says he is pleased with the sales of Prudential’s flexible protection plan Pruprotect.

He says: “I really believe innovation will shake up a market which is quite tired. The traditional way of doing business is broken and requires new solutions to encourage more consumers to buy protection.”

Highclere Financial Services partner Alan Lakey says income protection needs a new focus but companies will not redesign it because they do not sell enough. He calls it a vicious circle because he believes providers would see more sales if they redesigned.

He says: “The majority of the products are designed by people who start from the premise of what should we sell rather than what do people need.”

He says life insurance is the only area of the protection market that is not in need of further innovation.

He says: “The Fortis product is not the answer to all of the problems in the protection market but it is a step forward in terms of innovation. Tom Baigrie is saying this is better than life insurance, which I agree with. Is it better than the Pru product or the Axa plan? No, it is not but the cost is much higher for those.”

Lakey says he has only recently begun to sell the Prudential plan because it has taken him a while to get to grips with it and he refuses to sell a product that he does not fully understand.

He says: “In an ideal world, we would buy individual components from different providers and bolt them together to make a policy tailored to the individual. Fortis is trying to make it easier for us to do this and they have come up with a good system.”


The joke’s on us

Sir Callum McCarthy was asked last week whether his views had changed on the retail distribution review since he made his speech at Gleneagles in late 2006. He said the wider world felt a very changed place since he made that speech and that he had thought it important back then to focus on whether the business model served the interests of the industry and its consumers but that there was still no definitive answer to that question.

Tapering of annual allowance – adjusted and threshold income

The definitions of adjusted income and threshold income used to determine whether, and to what extent, someone’s annual allowance will be reduced can be confusing.  Here we try to make sense of it all. The annual allowance will be reduced for high income individuals from 6 April 2016.  Our previous article Tapering of annual allowance […]


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