Income protection or critical illness cover?

Justin Harper

Justin Harper

As you may know, the National Lottery recently launched ‘Set for life’ – a game which provokes discussion around the ‘capital or income’ dilemma; would you prefer a longer-term income, or a windfall?

It is a challenge we have battled with in the protection insurance world.

Which product best suits our client – a lump sum payment from critical illness cover or longer-term support from income protection?

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In my opinion, the short answer is that there is a place for both IP and CI as they address different risks in different ways.

So, when it comes to the desire to bring them closer together – as was suggested in the Financial Services Consumer Panel paper ‘Understanding the Protection Gap’ late last year – or even developing a simple hybrid product, I wonder if we are looking at this through the wrong end of the telescope.

Could we just get better at packaging and presenting a combination of IP and CI as a simple everyday solution?

As providers, an important part of our job is to help advisers have the right conversations with clients – helping identify problems, consequences, and of course, solutions.

We have seen the development of online calculators that have aided thousands of adviser/client conversations – at LV we call ours the ‘Risk Reality Calculator’ and other insurers have something similar – but the common theme is that they help identify solutions without falling into product jargon. 

More sizzle

Professionally, we should be comfortable explaining the technicalities of the protection products we sell and recommend, but can we serve consumers better by putting more focus on the solutions they can deliver?

To massacre an old sales cliché - more sizzle, less sausage.

It is the iPhone analogy – a product that most people think is easy to use while accepting they have no idea how it works.

In my experience, consumers ‘get’ CI as a product, but when it comes to explaining the value of IP we spend too much time exploring the different circumstances, risks and legalities – the working parts.

Yet if we distil it down, it too is simple in concept – IP works when you cannot.

More rounded solutions for advisers

From an adviser’s perspective, new developments are helping present the case for IP and/or CI to their clients.

Portals – such as iPipeline – help you to mix, match and tailor solutions from different providers.

Meanwhile, intelligent interactive underwriting systems – such as UnderwriteMe – allow advisers to submit information quickly in one application, and generate immediate decisions in up to 70 per cent of cases.

More everyday solutions from providers

As providers we are seeing IP continue its development towards a ‘back to work’ plan.

As well as the core insurance benefit, we are adding services that focus on prevention, early intervention, rehabilitation and back to work services.