Financial protection insurance is often misunderstood and, as a result, ignored by the general public.
It is also considered too expensive and although the era of payment protection insurance is coming to a welcome end, its shadow casts doubts in many minds that all forms of protection cover pay out for the few, not the many.
Thankfully, the image of financial protection insurance – especially that of critical illness cover and income replacement – is slowly improving. And, with it, the reputation of the insurance in the eyes of those who put together the personal finance pages in the national press.
I know many investment-oriented financial planners who have recently rediscovered their interest in protection insurance and attended for the first time the annual conference organised by Protection Review – where the only topic is financial protection cover.
Sally Hamilton, my colleague at The Mail on Sunday, recently wrote an informative article on critical illness cover. This looked beyond the propensity of this insurance to meet claims (this should be a given) and described some of the additional benefits that it now comes with.
These include everything from children’s cover (automatic or as a paid-for extra) and access to second medical opinions to counselling services for those reeling from trauma or fallout from a marriage breakdown.
Ten years ago, such a personal finance article could not have been written. The industry has come a long way – hallelujah, I say.
It is a point acknowledged CIExpert’s Alan Lakey, who believes some insurers are making critical illness and income replacement cover more appealing and simpler to understand.
Reducing the number of policy conditions, stripping out unnecessary policy wording (in Lakey’s words, “extraneous verbiage”) and extending the breadth of cover are all essential, he says, if financial protection insurance is going to become what it should be – an essential building block of a household’s finances.
“Overcomplexity,” he says, “is a turn-off for advisers and leaves consumers bewildered.” Absolutely. Spot on.
One of the most welcome trends in the industry is the publication of claims statistics by providers – a point I made back in June.
This data has been transformative, providing overwhelming evidence that most insurers meet most claims (90 per cent and above).
Yet I believe more should be done in this key area. Some issue splendidly detailed data (Zurich excels), a few provide data grudgingly, while others simply refuse to play ball. All rather unsatisfactory.
Given this, it is most welcome that consumer champion Fairer Finance, Protection Review and the Protection Distributors Group (with a little help from myself) have got together to make claims statistics fit for purpose.
The burning objective is to ensure that data published is honest (an absolute must), consistent across providers and issued promptly.
The approach has two stages. For 2020, the group wants to ensure insurers adhere to a four-point plan.