Protection 

How to deal with five big protection controversies

  • To understand what protection hurdles advisers need to overcome.
  • Learn what various government changes have affected protection advice.
  • Grasp the merits of different types of protection for different situations.
CPD
30min
How to deal with five big protection controversies

According to reams of research, the majority of the UK population does not have sufficient protection insurance in place in the event of ill-health, accident or death, leaving the door open for potentially catastrophic consequences. 

This fact, if we may call it so, is well known by government, by regulators and, by many of those without the insurance in place.

It is often argued, including by myself, that as an industry we need to better engage, educate and empathise with the public in order to close the protection gap – and we read yet more reams of research telling us how to go about doing it.

But what if the public by and large is already engaged with the idea of protection? What if the truth is most people out there with a family, mortgage and job already know they should probably do something about their protection needs?

And what if, when the time comes for them to feel ready to engage with us, they find the whole process, options, paperwork and reputation we’ve created completely off-putting?

If there is some truth in this, then it becomes less about engaging with the public, and more about building a process that allows people to buy the cover they need, when they want to, in line with their expectations, rather than ours.

Against this backdrop, independent advisers are committed to giving best advice yet increasingly face unwarranted barriers and comeback that bring that advice into question. Why? Because government, by its very nature, as well as consumers, can be short-termist.

Consequently, persuading ministers to convey a message about the long-term benefits of protection to corporate UK and society as a whole is nigh on impossible. Besides, which minister really wants to go out there and say that state benefits might not cut it? That’s not exactly a vote winner, even in these post-fact times in which we live. 

While some advisers might, understandably, feel they’re between a rock and hard place when it comes to protection, it’s also worth bearing in mind that the need for independent advice has never been more vital. 

So in the spirit of ‘forewarned is forearmed’ this month I focus on five of the biggest controversies in protection, past and present, starting with a particularly interesting case reported by FTAdviser earlier this year.

Level term assurance and repayment mortgages

The Fos recently ordered an IFA firm to pay compensation to a client who claimed that she should not have been sold a protection policy back in 2007, which consisted of level term assurance and critical illness, to protect her repayment mortgage.

She claimed the business told her that taking out the policy was a condition of obtaining the mortgage and she did not need it because she had employee benefits.

CPD
30min
  1. To what level was the Lifetime Allowance reduced on 6th April this year?

  2. What is a typical maximum payout term for STIP, according to Zurich Insurance?

  3. Which one of the following statements about STIP and ASU is correct?

  4. Which one of the following statements about Aviva’s Relevant Life / CI plan is not correct?

  5. When advising a client to take out level term assurance (LTA) alongside a repayment mortgage, which of the following should not be included in the notes on file?

  6. Why was Pension Term Assurance so popular?

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