It's becoming increasingly evident that the level of consumer interest in Protection products is falling. An alarming report in a trade magazine recently stated that more people now insure their mobile phones than have critical illness cover. But is this sensible?
And are consumers leaving themselves and their families or loved ones unnecessarily exposed?
Unfortunately, it’s not only consumers who will suffer from this negative trend. Advisers will find it harder to talk about the need for Protection, the more uncommon it becomes for consumers to believe they need it in the first place. And where will this leave advisers when taking account of the principles of treating customers fairly? After all, Protection should be taken into account if any adviser is to give a truly holistic view of their client’s financial situation.
There are a number of factors affecting the current Protection market. One could argue that consumers’ issues with cost, complexity and non-payment of claims are still very much at large. Another factor would be the rise of low-cost, supermarket products. This has had a great impact on the role of advice in the Protection sale, as the design of these products often negates the need for it. So is it really any wonder that both consumers and advisers have questioned the value of Protection recently?
In order to help consumers, whilst also taking advantage of the estimated £2.3 trillion Protection gap2, Protection needs to be flexible, fair and comprehensive. The introduction of menu-based solutions around 10 years ago started to provide the market with this, as well as the perfect platform for advisers to give advice.
So why is it that when there are a number of mature, tried and tested, flexible options out there, the market looks like it may still be facing a tricky time? And in a market arguably ripe for continual re-evaluation and re-invigoration, isn’t it about time that someone did exactly that?
It’s fair to suggest that there has been a re-examination of the traditional segmentation for CI cover. Some companies have realised that a much wider audience exists outside of mortgage buyers, which is an
important step forwards. There is also a market for affluent clients who have investments to safeguard. If something unexpected were to happen to them, would they really be prepared to use up everything they’ve worked so hard to generate, when they can afford to protect it in the first place? A one-size-fits-all approach just won’t meet customers’ needs.
And that’s where products like Prudential’s new Flexible Protection Plan come in - revolutionary because they offer a different approach to Protection against serious illness and also flexible enough to be shaped to help match consumers’ needs. Prudential believe their new product will work in the UK as their designers took inspiration from the South African market-leading Discovery Life. The Flexible Protection Plan may be the first of its kind in the UK, but advisers already believe that many are sure to follow.
To help advisers get up to speed with their new product so that they can recommend with confidence, Prudential has committed to a series of training seminars, which are currently taking place across the UK. The seminars look at the product in more detail, and in particular the new concept of their Serious Illness Cover:
- With payouts based on severity of the illness or condition, provided they meet the definition, a client could receive financial help at an earlier stage of an illness or condition
- As it’s severity-based, it covers a wider range of serious illnesses and conditions than traditional CI plans - 140 under its Comprehensive Cover Option (4 times that of most CI plans)
- For most conditions, and if they have adequate cover remaining, a client may receive more than one payout if an illness worsens, or if they suffer from another illness in the future.
The Flexible Protection Plan is a regular premium Protection product, available on a whole of life or fixed-term basis. It can include Life Cover and/or Serious Illness Cover. Payouts are assessed on severity of the condition and could be between 10% and 100% of the Plan Account. Some payouts may be more or less in comparison to traditional critical illness
plans and competitors may pay out on illnesses that are not listed. It’s also subject to terms and conditions (available on request) and exclusions may apply.
Prudential is committed to bringing about positive change for both advisers and consumers, and breathing new life into the Protection market. Find out more at www.pruadviser.co.uk/fpp or by talking to
your usual Prudential contact.
Source 1 - Bright Grey Research; 2,000 participants; Money Marketing, 23 November 2006.
Source 2 - Life Insurance Protection Gap - Swiss Re, 2005.
Bought plans in 1988 and 1989
To be added to model portfolio service
Launched 25 September