Customers are frequently sold inappropriate protection because adviser views are formed by product marketers and ease of sale, rather than fact find and suitability for client, according to the Income Protection Taskforce.
The IP Taskforce has produced a white paper with a nine-point plan for reviving the market, which has seen falling sales, a lack of awareness and product complexity.
The paper recommends professional bodies, such as the Association of IFAs (AIFA) and the Personal Finance Society (PFS), ensure advisers are competent and aware of the incidence and impact of disability.
It states: “In many cases, adviser views have been formed by product marketers and ease of sale rather than fact and client find. This has created customer disadvantage in that in a high proportion of cases, they are sold inappropriate covers.”
Similarly, the paper highlights the fact mortgage advisers and brokers sell mortgage payment protection (MPPI) and accident, sickness and unemployment (ASU) products because they are easy to sell and pay well.
The taskforce believes there is an opportunity to replace these sales with IP by simplifying application forms and outsourcing to financial planners who specialise in IP.
Other recommendations include:
- Using tele-underwriting to ease the problems faced by advisers at application stage and ensure a higher quality of underwriting;
- Addressing product design by considering the Holloway model and ‘hybrid’ products which are aligned with long term care, critical illness and PPI;
- Robust enforcement of the treating customers fairly (TCF) principle, in particular over high commissions;
- Adopting a default of essential expenses so the default level of cover is not too high;
- Raising consumer awareness through a compulsory annual statement of ‘sickness and other employee benefits’;
- Collaborating with the government by aligning the incapacity benefit system with a definition of sickness under IP plans; and
- Standardising non-competitive product conditions.
Teresa Fritz, spokeswoman for Which?, says: “Of course consumers need choice, and ultimately some better products to choose from. But they also need help and advice to choose the right protection product, the right level of cover and the right provider. And they need providers and advisers who are willing to stand behind that advice and take responsibility for it.”
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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From 6 April 2019