Have recent product developments shown that it’s time to put Income Protection first?

Have recent product developments shown that Income Protection is now on the right trajectory?

We now have some momentum that will continue until we are left, hopefully, with a product that is simple, easy to understand and, most importantly, protects people when they need it most – when they can not do their “own” occupation.

Please read my latest article in Financial Adviser – just click on the picture below.

Income Protection

Now it’s your turn: Now that most companies are offering “own” occupation for most jobs, what do providers need to do next to make Income Protection simpler to understand? Please leave a comment or post a link to your own article.

What do you think is the Future of Critical Illness Cover in the UK?

If a journalist phoned you and asked you what you thought was the future of critical Illness cover in the UK, how would you answer?

Would you say it had a bright future? Can it look forward to stronger sales and growth? Or  would you say that the market will remain flat?

Critical Illness

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I don’t know about you but I hoard things. Press cuttings, articles, comment pieces, ebooks, everything. It’ s given me an opportunity to look back at some of the answers people gave to the “future of critical illness cover” question over the last twenty years. Most were very optimistic about growth. Many mention “complexity” and the “illness race”.

One article in particular stands out. It was written by high-profile protection adviser, John Joseph, in the early 1990s. The gist of the article was as follows.

“Critical illness cover is important. But each company covers a different set of conditions. And they all use different definitions. How is an adviser meant to cut through that complexity and make a sound recommendation? We need standard definitions.”

After a few years of campaigning in the media and speaking at conferences, John Joseph finally created inertia for standardisation. First came the AIFA standard definitions for six core illnesses. Then came the Association of British Insurers (ABI) standard twenty (now twenty-three) in 1999.

Thanks to John Joseph’s efforts sales of critical illness cover began to take off. The market grew. Everyone agreed that the future of critical illness cover was very bright indeed. That’s what they said to journalists then.

But are we actually any further forward now than we were twenty years ago?

Most mainstream critical illness propositions cover up to 50 conditions. That’s twice as many as the ABI standard twenty three. And most providers offer what has become know as “ABI Plus” definitions. These offer better cover by missing out some of the standard small print. Whilst this is good for the customer, and means providers pay more claims, it also means that we are exactly where John Joseph described all those years ago. Each company covers a different set of illnesses. And they all use different definitions.

The original round of standardisation created market growth. Since the product has become more diverse again sales have flat lined. And yet there is not a month that goes buy without another product launch added more conditions, partial payments and new takes on “ABI Plus”.

They may give clients comprehensive cover but they are complex and difficult to understand. So is the future of critical illness cover simpler products?

One adviser I spoke to doesn’t think so:

“You might expect a simplified product to work but it won’t in the independent market. You can’t differentiate the simplified product on price without removing one of the five top reasons for claim so only removing illnesses 10 and above is going to make almost no difference whatever, other than the perception that you’ve made the product worse. Advisers won’t sell it – why should they? Their fear is their client would get that very obscure disease at number 12 on the claims chart and sue them for not recommending a product that was available at a similar price which covered it.”

My conclusion is that product providers make the propositions more complex purely to gain more share of a market which is declining because it’s complex. The mechanics of the industry feeds our craving for complexity and stifles the potential success simplicity could bring.

Now it’s your turn: So what would you say to that journalist about the future of critical illness cover? Do you agree with my diagnosis? I would love to hear your thoughts on this subject. Please leave a comment by clicking below or leave a link to your own article.

Why do people think companies pay less than 80% of protection insurance claims when the real figure is 98%?

You know that protection providers pay 98% of protection insurance claims don’t you?

The scary thing is that, according to a new Infographic by Reassured the public think that companies pay less than 80% of claims.

Why is there such a wide gap between perception and reality?

Well 20 years ago perhaps 30% of protection claims were declined. Not an impressive figure but still nowhere near as high as public perception. Now two decades on thanks to initiatives by the Association of British Insurers to cut non-disclosures, clearer questions on application forms, and easier to understand definitions, companies pay life assurance claims in the high 90%s and critical illness claims in the low 90%s. Even income protection claims sit in the high 80%s.

And yet still the public think the figure is less than 80%.

I was on holiday recently and as usual I browsed the books in WH Smith’s before the flight out. A book caught my eye, called “The Art of Thinking Clearly” by Rolf Dobelli. I read a couple of chapters and was immediately hooked enough to buy it.

So what has this got to do with the public thinking that companies only pay 38% of protection insurance claims?

Well “The Art of Thinking Clearly” gave me an insight into what is going on here. The 38% claims paid figure prevails because of the way humans think and the way we filter information. The chapter in the book about “Confirmation Bias” was a revelation.

What is confirmation bias? It’s a tendency of people to seek information that confirms their beliefs. People gather or remember information selectively and then interpret it in a biased way. The effect is stronger for emotionally charged issues and for deeply entrenched beliefs. They also tend to view ambiguous evidence as supporting their existing view.

So if someone has heard that companies pay less than 80% of protection insurance claims, despite the fact that they can find many arguments to the contrary on the Internet, they will select the articles that confirm their view-point and deliberately or subconsciously ignore those that conflict with their view. You can now see why it is so hard to convince them of the truth. Their belief is so deeply entrenched that they will only acknowledge the information that confirms their view.

Providers, advisers and media commentators therefore have a tough job to overcome this perception. However I believe that slowly we are starting to change that perception.  There is still a long way to go though. And we need more positive stories than ever about successful claims and how they have rescued people’s financial affairs.

Confirmation bias works both ways though. We are also subject to confirmation bias. We will naturally seek out the information that supports our view that companies pay 90% of protection insurance claims. To become better at helping our clients we should have a closer look at the articles and reports that support the myths so that we can even better understand them and refute them.

Now it’s your turn: You might think that talking about “confirmation bias” was a strange concept to introduce into a blog about protection insurance. But I found the concept fascinating. What do you think? I would be very interested to hear your views. Please leave a comment below or post a link to your own blog.