There have been many attributed to the humorous version of the old saying…. football managers after the sack, comedic geniuses and many a man (or woman!) just down on their luck for one of many reasons. History is littered with situations where someone or something has “snatched defeat from the jaws of victory” or, to give it a more literal meaning, “to lose a contest one seemed very likely to win”.
In our world of financial services, quality advisers work to recommend to their clients a range of Products that can help to limit the impact of loss - no matter how little or severe that loss may be. In addition, it is incumbent on all financial services professionals to help to prioritise the products and services available to clients to “soften the blow” as it were in the event of loss. As everyone reading this will know, that is not always an easy task! The task is not made any easier by the way in which the state is consistently adjusting the goalposts in relation to benefit payments – which will change again in 2016. So, whilst the illness or injury is the “door shut,” the reduction in state benefits is definitely the “slam in the face”.
We know from the numerous published surveys that although as many as half of workers would struggle to pay their household bills if an illness left them unable to work for 3 months or longer, they are still more likely to take out pet insurance than income protection. Results, such as those below, help to demonstrate where clients' priorities lie - and in many cases, this is borne out of the premise that the Government will support them when they have an illness, injury or indeed death.
EMPLOYMENT AND SUPPORT ALLOWANCE
In a recent survey, respondents were asked how long their employers would continue to pay their salaries if they were unable to work due to illness or injury. 58% said they would not receive anything beyond 3 months, while 24% said they had no sick pay at all. They were also asked how much they would need to cover all their household bills. The average answer was £208 per week. However the maximum Employment and Support Allowance available from the Government is £108.15 per week. So if workers were left unable to work and once their savings and employer sick pay run out, they would have to cut their household expenditure by at least 48%.
From 2016, the issue gets worse due to changes in benefits with two key areas being affected. These are Support for Mortgage Interest and Working Age Bereavement benefit.
SUPPORT FOR MORTGAGE INTEREST
In relation to the Support for Mortgage Interest, the current position is that:
- It is conditional on claiming Employment and Support allowance (ESA) or Job Seekers allowance (JSA)
- It is limited – interest on first £200k of main home mortgage at standard interest rate (currently 3.12%)
- There is a waiting period – 13 weeks
- It is time bound – support limited to 2 years
The position on Support for Mortgage Interest post April 2016 and 2018 will be:
- It will be conditional on claiming ESA or JSA
- It will be limited – interest on first £200k of main home mortgage as above
- It will be time bound with support limited to 2 years as above
- There will be a waiting period of 39 weeks
- The benefit will be transferred to a secured loan in 2018
This has led the charity Shelter to conclude that it is a “fundamental shift” in welfare provision.
Similarly, in relation to bereavement allowances, the current quite complex position is that:
- There are 3 different payments are made to widows, widowers or civil partners under State Pension age at the time of bereavement, depending on a claimant’s age and whether or not they have dependent children.
- There is a Bereavement payment of a one off tax free payment of £2000
- There is a Bereavement allowance – which is a taxable weekly benefit which can be paid to someone if they are 45 or over and under State Pension age, for up to 52 weeks
- There is a widowed parents allowance of a taxable £112.55 weekly which may be payable to a widowed parent if they have at least one child for whom they receive child benefit, payable until the child ceases to remain dependent or the claimant reaches State Pension age or upon remarriage, cohabitation or becoming a civil partner.
The new position becomes less complex but is designed to further reduce State support in most circumstances, namely:-
- There will be new bereavement support payments to replace allowances
- It will be a one off payment of potentially £5000
- A monthly allowance of £400 payable for a maximum of 12 months if you have a dependent child
Given the potential amount that is currently payable, it is clear that total State payments to widowed parents will reduce - in some cases, significantly. Not surprisingly, the onus is then further heaped on the individual to support themselves. We have seen Providers increasingly delivering innovative solutions to support these changes, but also to try and highlight the need for support to cover “when the door slams” for clients in the first place, as we will discuss below...
In relation to Income Protection, VitalityLife have several features within
their plans which are particularly innovative, for example:-
- Recovery benefit provides access to £2,000 worth of specialist care and support to aid recovery to work, including counsellors, support groups and training courses
- Back to work benefit - totally unique and will pay clients a cash bonus to help with the cost of returning to work – the STIP will pay 25% of their last monthly benefit amount in the first month and 10% in the second month
- Guaranteed benefit - guarantees the benefit amount if the policyholder verifies their income at application stage. Even if their salary reduces the benefit will remain unaltered.
- Another feature unique to VitalityLife is their Permanent disability uplift – boosting the benefit if the client develops a PD
…Of course VitalityLife also offer premium discounts and cash back depending on engagement with their healthy living scheme, as well as access to a range of reward partners. They say no other insurer provides policyholders with the opportunity to control premiums through lifestyle choices.
Income Protection Specialist, The Exeter, also have a wide range of products and innovative solutions especially in the area of medical and financial underwriting. As a specialist in this area, with over 100 years of experience, they uniquely offer THREE types of plans to suit different types of client. In addition, they have recently incorporated “Underwrite Me’s” new underwriting system into their income protection application.
“Underwrite My Client Now” has the potential to transform the income protection buying journey, where your clients' answers mean The Exeter can offer immediate cover, you can ‘apply and buy’ – no more waiting for an underwriter to give a decision, thereby speeding up the process. If you have a login for The Exeter's adviser online system, you can use this new application route straight away.
From a financial underwriting perspective their Bills and Things Product range continues to have no financial underwriting at application or claim stage again designed to make the process of claiming simple and quick.Further details on their award winning products can be found here.
In a broader sense, Bright Grey question if the selling of cover is to support clients is enough. They point out that whilst providing advice on products helps clients to be protected, using a more holistic approach to their protection needs means that you’re not only giving them complete cover, but you’re treating them fairly too. Bright Grey support intermediaries doing this via their Good Parent Portfolio. The Good Parent Portfolio helps you talk to your clients about making a will, putting protection plans in trust, and the importance of thinking about guardianship. Issues that most people don't like to think about. Further information can be found here.
Furthermore there are short videos available to highlight the benefits of the Good Parent Portfolio, click here or the image below.
Following the broader theme, in the survey mentioned earlier, one of the reasons that respondents didn’t take out life protection was because of the lack of confidence in claims being paid out. Zurich continue to lead the field in this area, with an impressive 99% of claims paid in 2014 for death (£116m), 91% of claims paid on Critical Illness (£63.1m), and almost £12m paid through 7,805 Income Protection claims. Thery have continued this trend in 2015, with 98% of life claims were paid during H1 to 854 beneficiaries with 2% declined for non-disclosure.
This, coupled with their flexible approach to underwriting, in addition to their extensive point of sales underwriting material makes the Zurich proposition a compelling one for advisers. You can explore their proposition here.
You should have recently received an email regarding aligning your General Insurance agencies to Paradigm, so that you can earn more per case on your GI business. By doing so, we will start to earn an override on this business, which we will share 50% of with you via our Annual Rebate scheme. Overrides can be also earned on GI referrals to our trusted Partners as well. In order to align your agencies to Paradigm, we would ask that you email firstname.lastname@example.org and we will recap the process.
If you wish to know any more about any of these changes or you wish to view any aspect of the Paradigm Protect proposition, please visit www.paradigmprotect.co.uk where you can also find all the Provider specific information you require.
Alternatively you can call Mike Allison on 07775 690340, email email@example.com or call the office on 0121 781 7337.