The importance of protection in a post-RDR world

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Protection - August 2013

Recognising the importance of protection products as part of an adviser’s skillset can pay dividends in the post-RDR world, Peter Hamilton has said.

The head of retail propositions for global insurer Zurich said a key challenge for the insurance industry was to develop consumer awareness and demand for the products, and to help moreadvisers become experts in the sector.

That way, he said, “we can also help advisers develop new business opportunities”.

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He added: “Protection is the most important part of our business at Zurich. It’s all about helping people to manage the risks that they face during different stages of life, both as individuals or employers.

“We want to help consumers understand the benefits of protection, from mortgage and family and critical illness, to income protection, business protection, and advisers can play an important part.”

Mr Hamilton said arranging protection was not as expensive as some people imagined as people live for longer – contributing to a drop in the price of cover.

“Lots of people overestimate the cost of protection by as much as 30 per cent, or even more. It’s not at the level people expect it to be.”

One country where the UK can learn from when promoting protection is Australia.

“Products like superannuation have built a great deal of awareness among consumers. This product obviously includes compulsion, which we don’t have in the UK, but it has also built an awareness that we dont have in this compeny, as it includes an element of protection.

“I would hope that the same would eventually happen here in the UK, with the logical next step to offer a protection element like Nest for auto-enrolment – a default, which gives people a basic level of protction would definitely take us in the right direction.

“In the current climate however, we have to build awareness with the tools we already have at our disposal. When you look at the impact when something serious does happen, it can be huge, so it’s very important that we get people to recognise the need for protection, and to accentuate the benefits of coverage.”

One way of doing this has been to publish claim statistics.

Zurich recently announced it paid out on 94 per cent of customer claims for critical illness cover for the first half of 2012, with the value of payments amounting to £34.5m, an increase from 90 per cent and £32.7m for the same period in 2012.

Just five per cent of claims were declined because the definition of the applicant’s condition was not met – compared to 7.5 per cent during the first six months of 2012.

Furthermore, just 0.7 per cent of claims were declined for non-disclosure of medical information, compared to 1.5 per cent last year.

Rhys Dudding, European chief claims officer for Zurich, said: “We are incredibly proud of these statistics which show even more valid claims have been paid out to our customers.