IFAM: Would you say that in some ways, the Covid-19 pandemic might have changed clients’ thinking about unforeseen circumstances? Have they become more open to the idea that awful things can happen and therefore by protecting yourself against the worst impacts if such events do happen to strike is important?
AH: Yes, absolutely. I think that the pandemic has highlighted to people that they’re not invincible and that sometimes the bad things can happen. We’ve seen quite a big increase in consumers coming to advisers and talking about things like income protection.
Of course, the pandemic has been such a disaster for so many people’s lives and livelihoods worldwide, but in many ways for the protection industry, it has increased its profile. More customers have begun to understand they do need some kind of protection against loss of earnings.
As you’d imagine, we’ve seen a massive increase in death claims and an increase in income protection claims which are being paid whether the cause was COVID or not. In terms of critical illness we have actually seen a decrease in the number of claims being made.
The reason for that is because people have not been going to their GPs and therefore have not actually been diagnosed. Unfortunately that might mean that for some clients their diagnosis might be more severe than it might have been if they had seen the GP earlier. As such, we do foresee a period over the next few years where we will see an increase in critical illness claims as people start going back to see their GPs.
IFAM: Are there particular protection product areas which you feel are particularly underutilised – or maybe not fully understood – by the advice profession?
AH: I’d have to say it’s income protection which is ironic, because ultimately it’s the product the client is most likely to claim against. You’re more likely to spend an extended period of work due to illness than you are to be able to claim on a critical illness plan or to die. And as such, I’ll keep coming back to it, but without sustainable income flows, every financial plan fails.
I would love to see more cash flow modelling tools provide advisers with easier ways of modelling lost income as “what if” events. In doing this an adviser could highlight to a client how long their savings would last, or how unlikely the financial plan they have is to succeed if they went without any income for a period of time. Based on these findings, for most clients, Income protection would be a no-brainer.
IFAM: What would be your key message to advisers and paraplanners?
AH: My key message is go back to financial planning 101. Most financial plans are reliant on a client earning an income for their success. Protecting that income is key and income protection is the perfect plan to do that.
Also not all plans are equal and protection is about much more than just price. The plans in the market now are becoming more and more comprehensive, offering more and more features. And if we can help people better understand those as well as the suitability and benefits of those wider features through Protection Guru, then then we’ve done our job.
Finally, protection plans do more than protect people financially. They also look after people’s mental and physical well-being, regardless of whether you’re able to claim on the plan. A lot of these added value benefits, such as counselling or the ability to access a GP virtually can be accessed at any time with no additional cost and as such are are supporting people from day one all the way through to the end of the plan. That’s really thought provoking.
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