Mortgage Introducer February 2022

Page 34

REVIEW

PROTECTION

Can simple products really be simple? Kevin Carr Xxxxxxxxxx chief executive, Protection

xxxxxxxxxxxxxxxx, Review; MD, Carr Consulting xxxxxxxxxxxxxxxx & Communications

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ometimes it’s about having fewer benefits covered, sometimes it’s about quicker underwriting or easier financial limits, or about having fewer added value benefits – simple protection products can be quite difficult to define. According to some experts, they can even make the advice process more complicated. “It’s a bit of a minefield really,” says Alan Knowles, managing director of Cura Financial Services. “But I think you could define simple products as any policy which has been designed to make the traditional policy simpler to understand or apply for.” CIExpert director Alan Lakey says: “Critical illness products are by their nature complex, and insurers are often their own worst enemies, in that they duplicate information, which adds pages to product literature and reduces the prospect of the brochures being read by advisers and clients.” Adam Higgs at Protection Guru adds that there are two types of simple products, in his opinion: “One is where the insurer strips out benefits to cut the price, the other is where the process is simplified – for example, less underwriting questions – which increases the risk, so insurers remove parts of the cover. Perhaps a riskier pool of clients, for example.” POLICIES AND PROCESS

One of the main benefits is typically a quicker application process, although this shouldn’t really matter to most advisers, as the focus should be on the best product and customer outcome, rather than saving time.

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Simple life cover policies generally have a reduced number of broader underwriting questions to make the application journey as simple and quick as possible. They are predominantly designed for those with pre-existing medical conditions, with those that have more than minor conditions usually being rated or declined. Typically, these plans will have lower sum assured limits, lower maximum age at entry or expiry, and a maximum

“The critical illness cover market is already a bit of a minefield for advisers to fully understand, and unless you are a tied adviser or limited to a small panel, the existence of simple policies may only add to the confusion. For example, whether to choose core or enhanced critical illness cover for the life assured, or whether to include children’s cover or not” term. They will also not include most of the non-core benefits – such as guaranteed insurability options, waiver of premium and the wider support services – offered within the full plans. Simple income protection plans can often look to address issues around fluctuating incomes and may have no financial assessment of income. Such policies will typically be limited in terms of the maximum benefit and claim duration. However, they are considered a simple solution to the problem, because at point of claim the agreed benefit is paid without any financial assessment if the client is working.

MORTGAGE INTRODUCER   FEBRUARY 2022

The critical illness cover market is already a bit of a minefield for advisers to fully understand, and unless you are a tied adviser or limited to a small panel, the existence of simple policies may only add to the confusion. For example, questions might arise around whether to choose core or enhanced critical illness cover for the life assured, whether to include children’s cover or not, and if so, whether that should be enhanced or core children’s cover. Lakey adds: “Ideally, I would completely redesign the brochures to reduce technical language, avoid unnecessary duplication and make the reading experience interesting as opposed to boring and drawn out. “Most of the advisers who subscribe to CIExpert tell us that they use the ‘simpler’ and cheaper plans as the base from which they can explain the value of the more comprehensive options.” THE BIGGER PICTURE

Naomi Greatorex at Heath Protection Solutions says: “This is a very relevant area right now, as I get so many questions asking my opinion on simple products and whether or not they make the advice process even more confusing. “In my opinion, the layers of different products make the advice process and clients more confused. “It is useful to encourage a conversation with clients on cost versus more comprehensive benefits, however it is complicated. “I also think that, as we get more and more complex choices and more ‘with or without’ options, this could be a turn off for advisers who do not give protection advice regularly.” To summarise, simple products might be more attractive, and can help some people obtain cover who maybe wouldn’t have been interested otherwise, which is great. However, every time an insurer adds a new product or new option, the overall landscape becomes a little more complex for whole of market advisers – and a little bit more off-putting for those who dabble. The big question is which one has the bigger net impact. M I www.mortgageintroducer.com