Protection News - November 2011


Mortgage protection: Still a huge opportunity?

According to Sainsbury’s Finance four in every ten mortgage holders do not have life cover to protect their mortgage.

The research findings suggest that there are nearly seven million people with a collective outstanding mortgage balance of £245 billion who have no life insurance to cover their mortgage and provide support to their dependents in event of their death.

It can safely be assumed that even fewer people will have some form of critical illness cover or income protection, which for many could be more important than life cover.

While this is nothing new, it does act as a timely reminder. The cost of protection insurance has, generally speaking, been falling for the last twenty years, however, this could change. Factors such as the EU gender ruling, Solvency II and other changes in taxation for life offices could mean that prices start to rise in 2012/13, which could change the protection landscape as we know it.

On the one hand, churning and switching existing business becomes much less likely if rates are going up, which improves persistency (and reduces lapses). Secondly, if rates are going to increase, which is the general expectation, now is a very good time to recommend protection.

But it’s not all about price. It’s about value. My favourite opening question to potential clients was always ‘Would you like the cheapest or the best value?’ and the reason I liked this approach was that the response was typically ‘What’s the difference?’ which is a great way to begin the conversation.

Not all CI policies cover early stage cancers, for example, but I’m willing to bet that most, if not all people, would want this covered. Although it doesn’t stop there, even those who cover early stage cancers will vary. Some require medical treatment where as other may pay out on diagnosis alone.

The way to move away from price is to understand the products, understand the client and match the two together. It is this technical expertise that sets good protection advisers apart and if all products were the same advisers would be little more than a quote engine, which to be frank, is not advice.

The rise and rise of social media

Being an IFA is very much about client relationships – and social media is all about relationships.

Social media sites such as Twitter and Facebook are not replacing face to face, phone or email communication, at least not yet; they are simply a new way of communicating in addition to what already exists.

If Facebook were a country, it would be the World’s third largest. A new member joins Linked-In every second, and more than 140m tweets are being sent around the world every day.

Whilst much of this is non-business related, a growing element, including financial services and the protection industry are using social media successfully because there are many uses for both personal and business use. It's a great way to keep in touch with contacts, media, competitors and quickly broadcast information and opinions across the industry – from the budget or RDR to last night’s TV or football.

Let’s be realistic though. It isn’t going to win new business overnight. It will take a little time and effort and whilst I have little doubt it will positively influence both business and brand the results won’t be instant.

Like most things in life – it isn’t for everyone, and you’ll probably get as much out of it as you put in. But the question isn’t if we embrace social media, it is how well can we do it.

In brief:

• Ageas Protect has launched a new Critical Illness product, which includes 15 ABI+ definitions
• Defaqto has launched a free business protection guide and says provider support is the key to unlocking business protection opportunities for advisers
• PruProtect and PruHealth has launched a range of new Vitality benefits including Thomas Cook, Adidas and Vodaphone
• Aviva UK life and pension sales are up 6% to £8.1 billion
• Friends Life has signed a new long-term agreement with Best Doctors to include its service in the company's new individual protection policies
• says 28% of people say they could not afford the funeral if their partner or spouse died
• Royal London life and pensions sales have grown by 12%
• Axa PPP has taken over all underwriting of Permanent Health Company’s private medical insurance (PMI) and dental products
• The National Institute for Health and Clinical Excellence (Nice) has banned another breast cancer drug from routine NHS use
• The Association of Mortgage Intermediaries is asking brokers to send it fictitious payment protection insurance claims they receive from claims firms so it can give them to the Financial Ombudsman Service
• Research by Devon-based Unusual Risks shows that 50 per cent of insurers are now offering some form of HIV life assurance
• Barclays has signed a new deal to distribute Aviva and L&G protection products

Kevin Carr is Chief Executive of Protection Review and MD of Kevin Carr Consulting

This article originally appeared in Mortgage Introducer magazine