There is much speculation around the current lock down being partially lifted from next week however, for many this is unlikely to ease the financial hardship they are suffering in the short term. Those that have lost their jobs may find it hard to find new employment due to many firms freezing recruitment and many more are at risk of losing their job as the full effects of Coronavirus comes to fruition. Over the last month the protection industry has responded positively to help clients suffering financial hardship keep at least some benefits in place and in this article we look at the full details of what Zurich are now providing to their customers.

Last Thursday, Zurich announced that they have introduced “extra flexibility” by offering three options for those suffering financially due to the crisis. These options include the ability to defer premiums, a relaxation of their career break requirements on income protection plans and the ability to reduce premiums.

Premium Deferral

Zurich’s premium deferral option is much like a premium holiday as the client is able to stop premiums for up to three months. Like LV=’s premium holiday option, the client’s full cover will remain in place during this three month period, however at the end of the three months the client will need to repay their missed premiums. If the client is able to they can repay the premiums in one lump sum, however if preferred they can repay these over a period of time depending on the type of policy they hold with Zurich:

  • Clients with policies taken out before September 2018 will have until 31st December 2020 to repay premiums
  • Clients with policies on the Life Protection Platform (Policy no. Prefix PR) will have two months to repay the premiums

Where a client is repaying premiums over a period of time the repayment of missed premiums will be added to their existing direct debit with no requirement to set up a new one. If after a period the client wishes to repay the remaining balance before originally agreed they will be able to do this by contacting Zurich.

Due to tax implications, Zurich are unable to offer this option to clients with pension term or qualifying life policies. Positively an advisers commission is unaffected if a client takes the premium deferral as long as premiums are repaid and the policy continues.

In order to qualify for the premium deferral the client will need to contact Zurich directly on 0370 241 6945 and confirm they are suffering financial difficulty at which point Zurich will discuss all of the options available to them. If the client still wants to proceed with the premium deferral Zurich will apply this to their policy and email them to let them know this has happened and the date of premium commencement. Clients do not need to confirm how they will repay the missed premiums until the deferral period has ended.

Career Break

Zurich have offered a career break option on all income protection policies sold via their Life Protection Platform (Policy no. Prefix PR) since September 2018. This allows clients to reduce their monthly benefit to a minimum of £250 per month with the premium reducing accordingly for up to 12 months.

Up until now to qualify for a career break, clients were required to have held the policy for at least 12 months. In another positive move Zurich have removed this stipulation for all policies that started before 31st March 2020 (policies put in force after this date still have the 12 month qualifying period) and for all such policies there is now no minimum qualifying period.

Unlike the premium deferral option there is no requirement for the client to contact Zurich directly and advisers are actually able to implement a career break via the policy servicing function in the adviser portal. Once the 12 months has elapsed the clients benefit and premiums will revert back to the levels being paid previously. From an adviser point of view it is also positive that the career break option will not affect commission

Benefit Reduction

The last of the three changes Zurich have made is to provide clients’ with the ability to reduce their benefits (and therefore premiums) for 6 months after which the policy can return to previous levels without the requirement for underwriting. This option has been made available to all customers with a policy on the Life Protection Platform (Policy no. Prefix PR).

To provide this option Zurich will need to satisfy themselves that the client is suffering from financial hardship and as such the client will need to contact them directly on 0370 241 6945 to discuss their scenario and the options available. If the client decides to take a benefit reduction, Zurich will refer the client to their adviser who will be able to effect the benefit reduction via the policy servicing capability within the Zurich Adviser Portal.

At the end of the six months Zurich will recalculate the increase in premium based on the age of the client at the time. This does unfortunately mean that clients may end up paying slightly higher premiums when full benefits are restored. In advance of the increase the client and adviser will be informed that this will happen and the new monthly premium at which point they can elect not to increase benefits, however if they take this decision they would need to go through underwriting to increase benefits at a later date (unless a Guaranteed Insurability/Milestone Option is used).

Unlike both the premium deferral and career break options, if a client decides to take the benefit reduction option, Zurich will clawback a proportion of commission proportionate to the reduction in premiums. When the policy is increased after 6 months however, Zurich will pay commission on the increase.

The three options at a glance

Premium Deferral
Career Break
Benefit Reduction
Which policies is this available for?
All policies except pension term and qualifying life policies
Income Protection Plans on Life Protection Platform taken out after September 2018
All policies on Life Protection Platform taken out after September 2018
Does full cover remain in place?
Yes
No
No
Does reduced cover remain in place
N/A
Yes
Yes
What is the minimum premium?
N/A
£5 per month
£5 per month
What is the minimum benefit?
Benefit remains the same
£250 per month
N/A based on minimum premium
How long can the option be taken for?
3 months
12 months
6 months
Do missed or reduced premiums need to be repaid
Yes
No
No
Does this affect commission?
No
No
Yes, commission on the reduced amount is clawed back. Commission is paid when benefits increase to previous levels.

 

Over the last month we have seen many insurers coming out with new initiatives to help financially vulnerable clients keep their policies in force. Each of these have been very well received and positive. LV=’s premium holiday option is a particular stand out as the client does not have to pay premiums and unlike Zurich there is no requirement to repay missed premiums, however Zurich are also offering a career break and benefit reduction options if this does not fit the clients’ needs. Also the fact that both the career break and reduced benefit options can be effected by the adviser on Zurich’s adviser platform really shows the strength of Zurich’s ability to service clients online. These changes really highlight Zurich’s commitment to their customers and their desire to keep them protected even when they are suffering financially.

2 Comments

  1. John Stevens

    Is the point about not impacting commission correct as we have been told that the Zurich systems start a clawback process

    Reply
  2. Jonathan Richards

    Hi John,

    The Zurich system does start a clawback process, but only on the benefit reduction option stated in the table above. We will clawback commission in respect of the decrease, however, when the policy is increased again new commission will be payable on the increase amount. There is no clawback on the premium deferral or the career break.

    Reply

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