Protection insurance is not a sexy sell. Far from it. But when it works – and is sold responsibly – this cornerstone of financial planning is more than effective, bringing financial comfort at a time of great upheaval and deeply upsetting family loss.
The latest claims figures from the august Association of British Insurers reinforces this point quite brilliantly. According to the association, the insurance industry in 2016 paid out more than £4.7bn in claims across the panoply of protection products – critical illness, life, total permanent disability, whole of life and income protection. This is equivalent to £13m a day. Some 166,000 claims were met in total, accounting for more than 97 per cent of all claims registered.
>The insurance industry last year paid out more than £4.7bn in claims across the full panoply of protection products
This was a great story that got little coverage in the national press, but it should have done. It shows the UK life insurance industry at its very best, and why the industry exists in the first place.
Understandably, Raluca Boroianu-Omura, the association’s assistant director and head of health and protection at the Association of British Insurers, was euphoric about the data, if not particularly happy that her soundbites fell on largely deaf ears.
"Products such as income protection, life insurance and critical illness cover improve the financial resilience of individuals, households and businesses, and give peace of mind, Ms Boroianu-Omura said. "Importantly, protection products also relieve financial pressure on the welfare state and the NHS. Insurers deliver on their promise to help individuals and households during a time of great distress."
He had every right to be ecstatic. The figures represent a vast improvement on what used to happen when many claims were routinely rejected on spurious medical non-disclosure grounds.
We now have protection insurance that is fit for purpose, although there will always be instances where rejected claims are drawn to the press’s attention and quite rightly get an airing (it is called holding an industry to account).
I still think there is a big issue surrounding legacy protection policies that have been superceded by better plans. People in long-standing policies should be given the opportunity by their insurer to upgrade to its latest cover, even if it means a premium increase. No doubt insurers and reinsurers will argue that this cannot be done but if there is a will there is a way.
Of course, the ABI claims data should be used by insurers and financial advisers to spread the gospel of protection insurance. A message that too many households still ignore, judging by the fact that each year just 1m people buy life insurance, 500,000 take out critical illness cover while a meagre 100,000 workers purchase income replacement insurance.
But life insurers have never been particularly good at waving the flag for financial protection. It has usually taken the brains – and nous – of brilliant individuals such as Peter Le Beau and Kevin Carr to put this insurance on the map with groundbreaking initiatives such as the Seven Families Campaign.
Protection specialist Alan Lakey, a senior partner at Highclere, has also done more than his bit with the creation of the incredible critical illness knowledge bank that is CIExpert. A labour of love that I do not think has received the accolades it deserves.
I believe the life insurance industry still needs to work harder to get the value of protection insurance across to the general public. Lots of good things are happening beyond the most important one that is promptly meeting a valid claim. It is just that not many people are being told about them.
A few weeks ago, Sally Hamilton (my colleague on The Mail on Sunday) highlighted a number of these positives.
Ms Hamilton reviewed some of the benefits that often come with cover, available without the need for a claim to be triggered. They include discounts on other financial products and gym membership, access to counselling and advice (including best doctors), the writing of free basic wills and free cover for children on many critical illness plans.
Post claim, access to wonderful organisations such as Red Arc and Winston’s Wish, a charity helping families cope with bereavement.
She also highlighted cases where medicals prior to insurance being taken out have revealed health issues that, if they had gone undiagnosed, would have caused serious problems further down the line.
I also like the latest initiative from the Protection Distributors Group – an amalgam of like-minded and consumer-focused protection intermediaries chaired by LifeSearch’s life office relationship director Emma Thomson.
In recent months, it has gently been persuading insurers to do more to help families who are struggling financially in the wake of a loved one’s death and are kept waiting for a protection policy to pay up.
In particular, it has asked insurers to pay funeral costs if no arrangements have been put in place to meet them. The latest insurers to fall into line are LV and British Friendly.
Last month, LV agreed to make early payments of up to £10,000 for death claims on most life products. This month, British Friendly added a ‘bereavement benefit’ to its income protection offering – a discretionary benefit providing a lump sum (minimum £1,000) to policyholders who suffer the loss of their spouse, partner or a child. It will not surprise you to learn that members of the Protection Distributors Group include Highclere, LifeSearch and London & Country – all good protection eggs.
Jeff Prestridge is personal finance editor of the Mail on Sunday
