Are protection products flexible enough to meet clients’ demands in 2024 and beyond?

“I think the first port of call really needs just to be highlighting the need for advisers to make sure that all of these risks and changing circumstances that women will experience in particular. Men obviously will experience them too, but women are still the primary carers, the ones that are less likely to be the primary earners as well. Advisers need to be factoring in the changing evolution of a typical women’s career progression if they choose to have a family. Not all women do. I don’t have children myself, and many of you won’t. But that’s really where some of these products are really quite restrictive. So for example, when you’re talking about income protection, and that’s one of the key things that often a lot of people don’t talk about. For people that aren’t earning, for example, house persons cover is massively undersold. So my first thing is that insurers really should be showcasing the real value of those products.”

“But for me, it’s more that the insurers need to be building in that level of flexibility so that peoples circumstances can evolve with their products, that advisers aren’t having to rebroke every single time. That obviously causes lots of issues. If there have been changes in health, which obviously could prevent somebody from actually being able to be rebroke, not to mention the hassle and lots of customers just won’t think about going back to their adviser if their circumstances change. Which links into the whole important piece about the need for advisors to be regularly reviewing cover with clients.”  

“There should be something really simple on annual statements to be highlighting what benefit you’ve got and what salary you would need to make sure that you’re actually eligible to claim for that benefit. But going even beyond that for me, I think there should be some flexibility.”

“I just think there needs absolutely there needs to be more flexibility. This is an issue that affects both men and women. So don’t get me wrong, I’m not just saying it just is a women’s problem. It really isn’t. But women are more affected by some of these issues because of just the nature of them going in and out of the workplace and changing their salary levels because they are more likely to be taking time out of work to look after children, which affects their career prospects and obviously their incomes. And for me, there just needs to be more leeway within products to allow for that.”

“We undertook research two years ago and that research looked at if the secondary earners income was lost, would you be able to pay the bills? And 20% of people said that their household would not be able to cover the basics, not the going out for dinners and the kids clubs, but the absolute basics the rent, the mortgage, the putting the food on the table, the clothing. If that second journey’s income was lost. And that’s why this is so important that income protection is part of those conversations.”

“Given the current climate we’ve got clients who have got have chosen to have index policies because their adviser has rightly said that that’s the right thing to do, and salaries are absolutely just not keeping in line with that. And you think, well, that’s just not it’s not really fair for somebody to be over insured for no real fault of their own. They haven’t tried to diddle the system at outset. They just haven’t been fortunate enough to obviously have a salary that’s kept in pace with inflation, which is obviously where their premiums have gone.”

“I think what we need to kind of understand here is that most of us that are on the forum will understand where the insurer sits with this, and that’s what we’re doing. But I think what’s also we’ve got to understand is that the whole point is the policy is there is designed to pay out. And it doesn’t matter what policy you go for, you’re going to get somebody that’s going to misuse it somewhere along the lines, you know, there are going to be those unscrupulous people out there, but that shouldn’t be to the detriment of the people that aren’t so. And the unscrupulous are actually the ones that are in a minority. Then majority of people will act with good intentions.”

“Indexation flexibility. There are still insurers who remove indexation if it’s ever declined. And obviously that could force clients to accept increases they don’t need and may struggle to afford, particularly given how high inflation has been recently, or lose obviously their indexation altogether, more likely without even realising that’s going to happen or it’s going to leave them over insured, as we’ve discussed. So that could end up being a really big issue and I potentially foresee that being a potential mis selling issue within our industry, given, as we said, wage increases aren’t really matching inflation increases. Emma mentioned that those letters that get sent out could be better. And just something that came to mind as we were talking about it was as well saying ‘your monthly benefit is going to go up to X amount’. How many insurers are telling clients that to claim on this, your annual or monthly income needs to be a particular amount? There are insurers that say that within the acceptance terms or the quote/documents, but I wonder how many are letting clients know that so they can decide whether or not they want to accept their increase. Personally, I think the three strikes rule that a lot of insurers apply should be adapted kind of industry wide as a minimum standard.”

“Another thing that’s a real bugbear of ours is longer deferred periods for income protection. Many of our clients work in jobs where group income protection is pretty common, and often these schemes are capped at 2, 3 or 5 year payouts. But I think we need longer deferred periods on personal IP, so there is a solution for these clients that doesn’t leave them actively over insured. This is an area I think is painfully lacking in the industry. There are products that simply don’t meet the needs of these clients. So credit to the three insurers that now offer 2 year deferred periods. Although if I’m honest, one of them out prices their competitors every single time I’ve ever looked.”

“Let’s face it, there are going to be many people who never get round to putting a policy in trust if they’ve even been advised to do so in the first place. So if we can let them nominate their beneficiaries when the policy is set up, we’ve done a lot of what a trust does quickly and easily. It’s a simple step. It could be more widely adopted and it frankly could revolutionise how clients protect themselves against probate delays and IHT liability.”

“I’d like to see something like a parental leave guarantee being brought in where for periods of, say, up to a year’s leave, if the client is intending to return to work on the same basis, the income is guaranteed based on their prior earnings and occupation class. There’s mortgage lenders who underwrite mortgages that way, so I think it’s fair to say it’s a fair question to ask. Why can’t insurers take that approach to insurance?”

“Payment holidays, payment policy break options I think they’re needed more because there’s going to be more and more clients going forwards in financial distress. And it’s particularly important given the focus Consumer Duty has put on things and the impact of the cost-of-living crisis. The biggest one that we seem to be told seems to be the lack of investment in systems, as a running theme as to why products aren’t keeping pace. So when we’re asking time and again, we’re told by insurers it’s their systems that won’t allow them to easily adapt their products. So I kind of feel that needs to be a focus. We’ve been having meetings recently with a number of insurers regarding forthcoming system upgrades. However, a lot of them will admit they’re not really making huge strides forwards in this space. They’re simply updating quite antiquated systems to bring them in line with what a lot of their other competitors have been offering for years. It seems to be integration with the likes of underwriting.”

“So clearly there are common theme issues that need to be addressed. What’s quite clear from everything that everybody said is that there are a number of things that we need to do as an industry.”

“When we look at what a lot of these products are doing nowadays, we are recommending products that are more than just about the insurance element. The insurance element is a given. It will pay out when it’s needed to, but it is the added value of those policies. So the value add is usually around encouraging people to take proactive steps to look after themselves. But what we are not doing is providing that support that says, we’ve given you this policy, you’ve taken proactive steps to look after yourself. You are now in better health. You’ve changed your smoker status. Therefore, we should be able to reduce your premium without having to re-underwrite you. 1 or 2 insurers will just reduce the risk. They accept that the risk has reduced and therefore reduced the associated premium, but there are quite a few who would say that that requires a fresh application.”

“It seems counterintuitive because of the fact that the reduction in risk should correlate with a reduction in premium and therefore should not really generate a fresh commission for the broker or even a fresh underwriting for the customer. So that’s something that I think we need to look at.”