Pioneer Friendly Society is intending to launch a 'new style' income protection product in the second quarter of next year which addresses some of the problems inherent in traditional policies.
The society was established in 1888 as a friendly society focusing entirely on providing Holloway-style income protection (IP) products with a simple pricing structure.
Today, it offers two IP products: ‘pure protection’, which is a flexible protection-only plan, and ‘income protection’, a traditional Holloway-style plan which replaces income and gives a tax-free cash sum at the policyholder’s selected retirement age.
Andy Chapman, chief executive of Pioneer, says because Holloway pricing gives the same rate for everyone it is easier for intermediaries to sell it and for consumers to see what they will receive if they make a claim.
As a result, he suggests Pioneer’s products are already tackling some of the problems inherent in IP, particularly where both intermediaries and consumers struggle to understand it.
Chapman is proud of the fact Pioneer is the only IP provider to publish its claims statistics and says in 2005 97% of all the claims it received resulted in a payout.
Despite this, Chapman is not resting on his laurels and he has numerous plans to help raise awareness of IP and innovate the market.
At the beginning of next year the society will look at “tidying up” its current products by removing some of the exclusions it deems unnecessary.
In the second quarter of next year Chapman hopes to launch a “completely different” IP product, as he believes the way IP is traditionally constructed needs to change.
He states: “IP is usually designed by insurance companies with the insurance company in mind, rather than looking at what the customer wants. We will undertake research to find out if people really do want a cash payment each week or whether they would prefer the provision of services, such as their house being cleaned.”
Chapman believes it is important to design policies which help people get better, rather than just give payouts, because it is an added benefit for the customer and it means companies pay claims for a shorter period.
As well as introducing new products, Pioneer is holding a series of seminars next year for small intermediaries to educate them about IP and raise awareness.
Chapman says IP should be an essential part of an individual’s overall financial planning and he believes it is more important than critical illness (CI), which does not cover musculoskeletal injuries or mental illnesses and often does not pay out when consumers think it will.
He is hopeful the income protection taskforce – which he is a member of – will also play a significant role in raising awareness.
The taskforce is expected to issue a white paper on IP in December looking at issues such as simplicity, awareness and the different sales channels.
Chapman is confident the IP market will grow as products are simplified, the level of awareness is raised and investment IFAs look to other sources to supplement their incomes.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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