Protection News - June 201122/07/2011
Should advisers charge for helping with protection claims?
An interesting debate has been taking place in recent weeks about whether or not advisers in a post-RDR world would, or even should, charge for time spent in dealing with their client’s protection claims.
As intermediary Peter Chadborn of Plan Money recently pointed out, many of us in the protection industry feel that the RDR adviser charging debate probably doesn’t apply because commission will remain, yet anyone selling protection products alongside other regulated products could be affected differently.
Most protection advisers who operate quite fairly on a commission basis wouldn’t think twice about helping their client through the claims process, without even considering any additional charging. However, those who seek to operate a ‘fee-only’ service may find themselves with an interesting dilemma:
Client: ‘Hello Mr Adviser, my wife has just been diagnosed with cancer. I seem to remember you convinced me to take some critical illness cover, what do we do next?’
Adviser: ‘That will be £200 an hour please.’
Is that really the world we would welcome, or should claims be left purely in the hands of the life office?
We all know life office administration can be poor – I once saw a claim acknowledged 6 weeks later on a handwritten compliment slip – and poor service reflects badly on the adviser too.
Peter Chadborn agrees: “Unless you have experienced the traumatic phone call from a client with the heart-sinking news that they or their partner have been diagnosed with something horrendous then I won’t begin to try and explain how it feels because I will not do the sentiments justice. How can we put a price on the assistance we provide at times like this?”
Then there is the issue of declined claims. I know several advisers who make it part of their service not only to manage claims, but to fight decisions as well.
No doubt some advisers would be happy to leave the claim in the hands of the life office, and yet jump back in when it comes to investing the lump sum, which might just be considered to be double standards.
Personally, I doubt if any serious protection adviser would ever leave their client purely at the hands of the life office during such a traumatic time. If and how they charge for their time is another matter, but it is yet another valid reason to maintain commission within the protection industry.
Should we embrace the new Money Advice Service?
Now that the adverts are running a number of leading figures within the protection industry have called for advisers to engage with the Money Advice Service (MAS) rather than fear it.
The ABI, reinsurer RGA and leading intermediaries such as LifeSearch have urged the market to take a proactive approach by contacting the service to raise any queries and to build on information offered by it to increase sales.
The service promotes independent, unbiased advice, which has caused concern amongst some advisers, with a few challenging the use of the word ‘advice’. However, it should be understood that MAS exists to provide very generic and unpersonalised guidance, such as ‘You should think about what to do about your income in retirement’ or similarly ‘You should think about how your family would cope if you were too ill to work’, as opposed to recommending any specific products, which is where advisers can add value.
Speaking at RGA's Write the future conference, Nick Kirwan, assistant director of health and protection at the ABI, suggested advisers could ‘capture’ customers after they had been through the information process:
"As an industry we should make sure we're ready to catch people coming out of that process as they're left being told ‘You should be considering some life insurance' but not being told how much and what to do next.
His comments were echoed by David Gulland, managing director of global reinsurer RGA, who advised the market to respond to the initiative and recommend any corrections.
News in brief
• The Association of British Insurers has published guidance terms for insurers in order to reduce the time taken to pay life insurance claims
• Ageas Protect is calling on protection providers to label their products according to the percentage of life cover, critical-illness and income protection elements included
• Brits are twice more likely to insure their pets or mobile phones than their income, according to research from Scottish Widows
• Lloyds Banking Group is preparing to axe 15,000 jobs as part of a £1bn cost saving plan, according to The Sunday Times
• Barclays has promised to repay all PPI complaints in full
• The average sum assured taken out by the gay community has increased by over £10,000 since last year according to research from Compass Mortgage & Insurance Services
• The number of dads holding income protection has fallen by 5% in two years, according to results from Legal & General
• More than half of those with life cover fail to upgrade after significant changes in their circumstances, according to Sainsbury’s Life Insurance
Kevin Carr is Chief Executive of Protection Review and MD of Kevin Carr Consulting
This article was first published in Mortgage Introducer magazine