Category: Insurance

Even though the General Election took place over a month ago, many people are still talking about how it was such compulsive viewing, with many staying up until the early hours awaiting the result.

The fascination was watching all of the opinion polls and predictions fall by the wayside as the losing political parties accepted their fate graciously. How did these parties get their strategy so wrong, why did it not deliver the clear objective to win the election with an outright majority?

Commentators gasped as the charts changed to a sea of blue and the Labour party were in shock as they saw virtually all their Scottish seats lost to the Scottish National Party in one night. Surely if the Labour party had been close to their customers and understood what they needed to do to get their vote they would have changed their tactics to secure those votes.

What was their strategy and did they have the right culture within the party to question the tactics to deliver that strategy? How would it achieve the end goal?

If people are afraid to speak their mind and go with the majority to keep the peace that is a culture that doesn’t work in either politics or business. If the public didn’t see Ed Miliband as a strong credible leader, why did the Labour party not see that either? If they were in touch with their customers surely someone would have stumbled across it.

It is the same in business – we set a goal, we put together a strategy to achieve it and then look at the tactics required to deliver that strategy. As always it is the team that you build around you that adds the magic required, they need to feel valued and listened to, their views are important to ensure you get the tactics right.

Once the team understands what is required of them and why their role is so important to deliver the overall strategy you have a good chance of achieving your goal. Setting the right culture is in my view essential, and putting the customer at the heart of the business is a culture that works well and leads to success. We have seen what happens when you don’t!

Despite the popularity of using a Price Comparison Website (PCW) to search for General Insurance, experts and the Financial Conduct Authority (FCA) have raised concerns over not just the compliance of the sites, but also their effectiveness in providing the right cover for consumers.

Do comparison sites really save time and money?

Consumers choose a PCW because of its perceived ability to save time and money. But consumer research by the FCA has revealed that obtaining a quote is rarely a quick process. In fact, research found that some comparison sites demanded answers to over 60 questions in order to obtain a Home Insurance quote, with many finding the volume of information and number of variables surrounding General Insurance products confusing and sometimes overwhelming.

Once consumers did reach the results page, not only did they find the options confusing, but there was also a lack of ability to compare like for like policies as well as cost. Often the lowest premiums would take priority, but the cheapest option is rarely providing the ideal cover, leaving the potential for long term consumer detriment.

Do comparison sites Treat Customers Fairly?

On the back of research undertaken in 2014, the FCA have highlighted that “a focus on price could distract from crucial product features and lead consumers to make an inappropriate policy choice that does not suit their needs and requirements”. In fact, PCWs will actively avoid going into the required detail regarding product options, in order to maintain the perception of speed and ease.

Consumers often have preconceived ideas about comparison sites, assuming them to be impartial and all-encompassing. But as the selling point of the sites is to provide a quick and easy way to compare insurance, it can often fly directly in the face of FCA guidelines on Treating Customers Fairly. Unfortunately some consumers currently use the site as a replacement for an adviser, assuming that the product they are guided towards is the best option for their circumstances.

Why is choosing an adviser a better option?

Choosing an adviser over a PCW gives consumers access to expert advice, industry connections and the knowledge that the adviser will find them cover tailored to their needs. To help in the battle against PCWs advisers now have access to tools like Paymentshield’s Premium Flex, which gives you the option to reduce premiums and bring down the cost of the policy. This means you can now deliver the best of both worlds; the perceived benefits of a comparison site, but with the peace of mind that comes from knowing they are offered the best products for their needs.

The protection gap in the UK remains a mystery to many experts, as consumers continue to prioritise their spending on short-term luxuries such as quickly-outdated technology and costly TV subscriptions. More worryingly, a study from a top provider in the UK suggests that 5.2m mortgage holders who earn an income have no protection cover, or even a plan to get one, to cover their repayments if they become too ill to earn.

It is therefore up to advisers to educate clients on how smart Income Protection cover is. We want to help you mend the protection gap by providing you with the tools to break down the barriers created by assumptions and misinformation.

Here is an overview of three of the most damaging myths surrounding Income Protection and the most effective fact-based weapons to use against them:

Myth 1: It’s expensive…

Income Protection is still one of the most affordable forms of protection and boasts some of the lowest premiums in the industry. As well as affordable, it is also one of the most widely suitable to consumers, who wish to ensure long term sickness won’t cause damaging financial detriment.

Use life and budget planners to show how much your client is spending every month. In most cases, it will dwarf the cost of Income Protection. People are often surprised by the low expenditure of Income Protection policies, so it is worth showing how little it can cost for that peace of mind.

Grabbing the opportunity to talk to clients about the cost of protection is invaluable. A survey by YouGov revealed that the majority of consumers admitted they would turn first to state and charity for support, before seeking financial advice. But the financial support from state and charity would likely only be enough to cover some major payments, let alone bills, food and other necessities.

Myth 2: It’s unreliable…

Despite many providers proudly announcing healthy payout levels, the myth that providers regularly don’t pay on claims prevails. Kevin Carr, chief executive of Protection Review, says: ‘The reality is that over 90 per cent of all claims […] in the UK are paid promptly and without fuss’, with most unpaid claims due to unmet criteria. The PPI scandals in recent years have also not helped matters. Unfortunately, some consumers continue to group Income Protection with PPI, when the two types of insurance are markedly different.

Ensuring your client fully understands how to get the most out of Income Protection is also crucial to its perceived reliability. Choosing a longer deferred period for example can reduce the premiums, especially useful if the employer would provide cover up to that point.

Myth 3: It’s unnecessary…

We have Protection Toolkits on Broker Zone to get clients thinking about the necessity of Income Protection by asking three important questions:

In the event of long term absence from work, how long would your employer pay your full salary?

Some people wrongly assume their employer would continue to pay them full salary for as long as they are absent. But many employers would only pay full salary for up to six months’ absence and are only legally obliged to pay statutory sick pay for up to 28 weeks.

Would you cope on state support?

Currently as little as £57.35 a week, state support would quickly be insufficient to prevent savings being dug into. Despite this, many consumers still harbour the belief that the state would adequately support them during financial detriment.

The process of claiming state support is also surprisingly arduous and entails completing lengthy and complicated documents; something your client could do without during the stress of long term illness.

How long would your savings last if you were unable to pay the bills or mortgage?

We just don’t save enough as a nation, which means for a large number of people savings would not last long if used to support their lifestyle in the event of long term absence. Remind your client how hard they have worked to build up any savings and how stressful it could be to see them dwindle away.

The need for Critical Illness cover has once again moved into the spotlight on the back of crucial findings from Cancer Research UK. They now predict that 1 in 2 of the UK’s population will develop Cancer at some point in their lives. Combined with the ground-breaking advancements in treatment pushing cancer survival rates beyond the ten year mark for half of adults diagnosed, protecting your clients and advising them on Critical Illness cover continues to be an essential part of your role as an adviser.

Sadly, despite the numbers the UK is drastically under-insured. This month’s Insight into Protection will explore some of the big issues, providing you with some of the facts and advice to raise awareness and discuss protection with your clients. We believe that by working together, we can close the UK protection gap:

What are the Facts?

50% of the UK population will develop cancer

It is still so surprising how many of the general public are unaware of the real numbers surrounding Cancer diagnosis and survival rates. It is a difficult and sensitive subject to tackle, but whether it be through loved ones or personal experience, a large number of us will likely be affected by the disease. Sadly, it can often take a tragic occurrence to make us stop and think, which is even more reason to encourage your clients to approach Critical Illness proactively.

50% of adult cancer patients are predicted to survive 10 or more years

Cancer survival in the UK has doubled in the last 40 years, a clear indication of the steps we have made to battle this terrible illness. It is this crucial fact that will be pivotal to your client protection discussion. This is difficult, as most people instinctively protect material investments such as their home and goods. But they will also want to cover themselves against the most likely scenario, which means given the facts, clients will want to ensure they are financially covered.

UK Households spend just £7.80 a month on medical insurance

According to the Office of National Statistics, under £10 is spent a month per household on medical insurance, compared to £22 spent on household insurance. Research from a top provider also suggests that 5.2 million UK mortgage holders who earn an income have no plan or protection cover in place to cover their mortgage repayments if they become too ill to earn, another reminder of the current UK protection gap.

Why is the UK lacking Critical Illness Cover?

Protection myths

One of the most damaging myths surrounding Critical Illness is that providers go out of their way to ensure they do not pay out on an insurance claim. This could not be further from the truth. In fact, several providers have proudly released figures regarding their Critical Illness claims for 2014, showing pay-outs of over 90%. One leading provider even announced that over half of their 2014 claims were settled within 21 days, with the quickest taking just two days to process. Reasons for the rare instances of non-payment were non-disclosure of medical information and more commonly, instances where illness definition was unfortunately not met.

Consumer reliance on state support, employer or savings

Unfortunately, some consumers believe that the state would cover them financially if they were not able to work for long periods. But state support is there to ensure individuals are not immediately put in a desperate situation, it is not there to protect an established lifestyle and maintain the financial commitments that come with it. Incorrect assumptions on how long employers would provide full pay, or how long savings would last are also common. So take the time to use current figures and calculations to show your client the facts around financial protection.

What can you do as an Adviser?

Prove your credentials

Nobody wants to be scared into buying a protection policy. Use software and applications such as the CIExpert comparison, to show your client the true value of their policy, not just the priced premium costs. LV’s Risk Reality calculator is just one of many useful tools that providers offer, to assist you in the sales process and provide your client with the cover they need.

Recognise the principles of TCF (Treating Customers Fairly)

Ensure that in no circumstance are you placing profit before the client, as this is not adhering to the FCA guidelines on Treating Customers Fairly. Instead, ensure your client has every chance to be fully covered, by providing clear access to all policy options that protect them against any chance of future financial detriment.

Make sure your client is completely covered

Although Critical Illness covers your client in the event of many long term illnesses, there are several reasons why Income Protection, Life or better still, a combination of the three could be more beneficial to your client. So tailor the advice you give to suit your client’s circumstances. There are even flexible protection options out there that include care, support and child protection, providing an even more comprehensive package for your client.

As an adviser, you have a tough job competing with comparison sites battling to offer the lowest premiums. But by beginning the conversation with the facts, proving your expertise and showing you are treating them as an individual, your client can walk away knowing they have been given every chance to ensure they are protected in the event of developing and surviving a Critical Illness.

What I love about this industry is the constant changes and challenges we face. Often we look back and find our businesses are stronger as a result.

Take the quality metric for example, lenders decide that they were no longer talking about sales volumes but had a whole new agenda about quality. Huge metrics were drawn up for networks with various combinations with which our AR firms would be measured. Some were so complicated it was difficult to interpret them. Over time they were tweaked and more information was shared with the networks, as a level of trust was built up for the first time with lenders and their fraud and risk departments.

As a result we all know and understand so much more. We are able to recognise information that needs to be challenged from day one. Many cases that may have potentially been a fraud case don’t get through the door and once you know what to look for, it is so much easier to protect your business and deal with the right clients.

However, one of those metrics has always puzzled me – how can networks and brokers improve on the number of cases that go into arrears. I feel that once the robust advice process has met regulatory standards and the lenders have used all of the systems they have available to check previous history, what else can be done at that stage to ensure the case never goes into arrears?

Divorce, death, illness, redundancy and hard times are all reasons for falling behind with payments but they are not really events that the broker can predict when arranging the mortgage. It is however a very relevant discussion to have with the customer of course, as many of these events are likely to happen and therefore providing protection for them plays an important part in the advice process.

However, it may be time for the lender to accept that if they are unable to give the broker any information on cases that are in arrears, including client name, brokers can do no more to cover this aspect.

The lender holds the data and the lender makes the ultimate decision to lend. They have access to far more information than the broker. They currently have little interest as to whether there is a policy in place to protect the client’s income which could prevent arrears in some cases. Maybe it is time for lenders to not only review the metrics but look at addressing the issue of protecting for the future when arrears may not be as low as they are now.

As an adviser running a busy business, finding the time to have an in-depth discussion with your clients about their protection needs can be a challenge in itself. But we believe that opening up an informed and honest dialogue with your clients about protection is about more than making the most of business opportunities, it is also about ensuring you are providing the right advice to your clients.

Whether you have already begun to make protection a major part of your business plans, or if you have not had the opportunity to think about it properly, we want to ensure you are equipped with the tools and guides to make the next step. Insight Magazine answers two of the most important questions an adviser will ask when contemplating selling protection:

“Why do I need to provide protection?”

To provide the most suitable advice for your clients…

Thoroughly going through protection options with your client proves your credentials as an adviser. Building trust comes from displaying a real belief in the purpose of your protection role: To provide your clients with the insurance advice they need to most effectively protect themselves against possible scenarios of financial detriment.

Looking back over your client base, how often does the client only opt for the protection option directly linked to taking out a mortgage? Protection should become a separate conversation, one that targets a different set of needs. We have an Insurance Recommendation Summary form on our broker website for just that purpose. To work through with your client, this is an important document that is used to evidence the conversation.

To make sure you’re Treating Customers Fairly…

One of the guiding principles of the FCA Sourcebook is for you to: “pay due regard to the interests of customers and treat them fairly’. You have a moral obligation to ensure your client has been given all the proper advice on what you can offer, how they can be covered and how little it can cost. So it’s not just about selling protection, it’s about staying compliant.

One of the most underused questions when discussing protection, is to ask your client whether they truly understand what is meant by: “Your home may be repossessed if you do not keep up with your monthly payments on your mortgage”. This can be a very effective tool to ensure they fully grasp the implications of suddenly being in a financial crisis. After all, your client is looking to build on their lifestyle, the last thing they would want is to go back a step.

To tap into an undersold resource…

The infamous protection gap in the UK is as big as it has been in years, with sources suggesting that it stood at an unfathomable 2.4 trillion pounds in 2014. This is testament to the attitudes regarding insurance for many people, as they prioritise how they spend their money.

But most forms of insurance are there to provide financial peace of mind. We believe that given a thorough and informed breakdown of how they spend their money compared to how much they spend on protecting themselves, many clients might soon change their preformed opinion on their insurance needs.

“What is the best way to discuss protection with my client?”

Empower your client with the facts…

There is no perfect solution to selling protection. But we believe that by equipping your clients with all the information, the tools and the advice to make their own decision, they will have every opportunity to realise how sensible a good protection plan really is.

Start off by asking the right questions: Do they know how the chances of developing a Critical Illness increases every ten years compared with the chances of death? Do your clients realise how lengthy financial processes can be in the event of a family member passing away? Do they know how much quoted premiums increase over time, suggesting a “wait till I can afford it” approach is detrimental to them financially?

But your client will also require hard facts to back this up and reinforce your assertion of their protection needs. Have factsheets and datasheets ready to produce that are catered for their situation, age and household circumstances. Clear infographics and charts are always a great way for clients to take the information on board. This can also include timescales regarding releasing finances, statistics around the probability of developing a critical illness, or current state payments for absence from work. People will always naturally want to protect themselves against the most likely scenario, which means given the facts, many would consider taking a protection policy.

Create a Menu Plan…

This is a crucial element of the protection dialogue you open with your client. Ensuring you always strive to offer the ideal world scenario or the ‘Utopian Version’ of protection is essential in complying with FCA guidelines. We encourage the creation of a comprehensive protection package for your client, where you can break down and individually discuss what each type of cover provides. Make sure you ask the right questions: Do they think they could live on their savings? How long would their employer provide full salary when they are off of work? Are they the sole bread-winner in the household?

This will allow you to segregate your client’s needs, so that each situation is covered on its own. This can then be collated to produce a full protection package for your clients. If possible, produce a professional and thorough family protection document for your clients to take away, in case they do not wish to make an immediate decision. You can always pick the conversation up another time with a follow-up appointment, which is protection-focussed and separate from the mortgage dialogue.

Make use of materials…

Lifestyle planners are another great way to discuss protection with your clients and to create budget margins to calculate expenditure. By breaking down what they spend on each luxury per month, you can work together to cut down on life’s little pleasures slightly, freeing up a surprising amount of money that they can spend on maintaining that lifestyle in the first place. Clients are often taken aback by how much they actually spend, which can open up more conversations around whether they actually need so much of a certain luxury. After all, many clients think about what they have “spare” at the end of the month, not what they have spent in the first place.

Some providers have bespoke toolkits available for downloading on their sites. These fantastic factsheets, planners and guides save you lots of time. There are even digital versions that can be worked through together live with the client. This can use quick calculations to produce financial solutions for your client, providing the most suitable advice on protection.

National Protection Sales Manager Bernie Buron wants to help you maximise your protection sales by recommending a holistic approach to offering and selling protection!

Step 1: “Make sure you introduce protection right from the start”

Plant the seeds right from the outset and make your clients aware that not only will you arrange their mortgage and help them buy their dream home, but you’ll also offer them the best possible protection of their lifestyle and their property should anything happen. Let them know it is your job as a responsible adviser to ensure they are given every opportunity to protect themselves should the worst happen.

When asking your clients to gather information such as bank statements and payslips, use the opportunity to inquire about any existing policies they may have, and any sick pay they may receive from their employers. This will spark the conversation you want and get the process of offering them comprehensive cover moving forward.

Step 2: “Make protection-only appointments”

Try and separate the conversations you have with your clients about their needs. This will allow you more time to focus on understanding you client’s protection concerns, what cover they may already have, and what the potential solutions are. An ideal time to have or book these appointments is around the AIP stage. With the mortgage process still in the early stages, the clients will be more receptive to talking about protection in detail, knowing there is a potential mortgage offer coming at some point.

Step 3: “Consider your Fact Find. Make your client’s needs a priority!”

Try and introduce soft conversational questions to get your client thinking about what could or would happen. For example:

“In what circumstances that you could imagine would you lose your home?”

“What financial impacts would mean you are unable to maintain your lifestyle?”

“If anything was to happen to you or your family, what lifestyle would you like to maintain?”

All these questions are designed to get the client thinking about protection. Don’t assume they have considered every situation, as many clients may have misconceptions and a lack of knowledge about the cost, effectiveness and necessity of protection.

Step 4: “Create bespoke protection portfolios”

Simply put: Build trust. No one wants to be sold to, so avoid the hard sell techniques associated with insurance. Instead, empower your clients with the facts, figures and advice thus allowing them to make an informed decision. Talking about protection does not need to only be about selling insurance. Instead, it should be a simple and responsible conversation. Talk to your clients in their language by asking them if they have thought about protecting themselves. They may not have given it much thought, considering that they are in the middle of taking out a mortgage.

Don’t try to be interesting. Instead, be interested in what matters most to them and make sure they understand you are simply being responsible by helping them to keep what they love and treasure. Creating bespoke protection portfolios with menu plans and quotes will show a commitment to caring and responsibility. This can go a long way to proving how seriously you have taken their protection needs.

Step 5: “Think like a dentist! Book follow-up appointments!”

Not every client will take your full recommendation and you may find a majority will only initially take out life cover on their mortgage. But don’t be perturbed by this as it doesn’t need to be the end of the road as far as protection goes. This could be the ideal client and the perfect opportunity to return to the conversation when the client has had time to reflect.

In other words, act like a dentist and look to book in a review meeting. As an example, call it a “protection check-up”, and commit to reviewing their situation in 12, or even 6 months’ time. This will give you the opportunity to discuss their protection portfolio directly with them and highlight gaps in their protection needs and requirements.

Follow these five simple steps and watch your protection sales grow!

Despite an upturn in the mortgage market, some industry experts have shown concerns that the market could revert back to its pre-2007 state, with mortgage advisers concentrating on mortgages and deserting protection and GI sales.

However, we are seeing a far more entrepreneurial approach, that whilst advisers have to spend more time on mortgages, they actually want to maximise that time, and rather than deserting protection and GI are seeing the current market conditions as an opportunity to take their business to the next level and requesting the necessary help and guidance to do that.

We have worked with a number of AR firms within our network on this, looking at where they want to be and helping them to tailor a business plan to suit each of their own business requirements, as of course each firm has different needs. The difficulty is often in recruitment, rather than a desire to only write mortgages, but we are now seeing results where some brokers have worked with us to train people within their businesses to learn new skills and become the much needed expert required.

My own view is that businesses need to bring people on, give them the chance to wow and show you what they can do. Given the right training and nurturing, the results can be extremely rewarding. Someone that has worked with your firm for some time and seen their knowledge grow every year not only becomes a more valuable member of the team but is often a person with great loyalty because they have been given the opportunity to shine.

We have seen para-planners become specialist protection advisers, checking that clients are not left with a protection gap. We have seen administrators for GI, become GI sales people as their experience and knowledge of the product tailors them to become a good adviser.

Brokers should ensure they look after all of their customer’s needs and in my opinion letting a customer go online for ‘DIY’ GI is a missed opportunity and a big mistake. Leaving a vital piece of the sales process to someone else just doesn’t work long term for either party. If there is a disaster, you want to be the person your customer contacts first, that demonstrates the strength of the relationship. You certainly don’t want to be telling them they are not covered, when they already devastated.

In fact a number of brokers I have spoken to have said that when a friend has rung them to check the cover they have on a loved one, in upsetting circumstances, it has been the point of great relief that they were indeed covered, but also a real trigger to ensure that all clients are also looked after in the same way, should the unexpected happen.

Bucking the trend, we have subsequently seen a significant increase in our protection sales and GI sales where firms have asked us to help them grow their businesses for the long term future and ensure that their customers are protected.