What advisers should know about simple protection policies

Sometimes it is about simplified products where fewer benefits are offered, other times it is about easier underwriting or financial limits, or it could be about having fewer added-value benefits included, and so on.

Adam Higgs, head of research – adviser services at FTRC, says there are two types of simple products in his opinion: “One is where the insurer strips out benefits to cut the price, the other is where the process is simplified. For example, less underwriting questions, which increases the risk, so insurers remove parts of the cover. Perhaps a riskier pool of clients, for example.”

“It’s a bit of a minefield really,” says Alan Knowles, managing director of Cura Financial Services. “But I think you could define it as any policy that has been designed to make the traditional policy simpler to understand and/or apply for. Maybe the ‘understand’ reference is a bit ambiguous.”

Alan Lakey, director of CIExpert, agrees. He says: “Critical illness products are by their nature complex and insurers are often their own worst enemies in that they duplicate information, which adds pages to product literature and reduces the prospect of the brochures being read by advisers and clients. 

“Also, with the recent focus on child cover and added benefits, the potential for confusion is even wider.”

All of this suggests that attempts to make things simpler may only cause more complication overall. 

The adviser sales process

Ironically, simple products can make the advice process more complicated, according to some commentators.

But that depends on whether you are an adviser with wider panels or one that is whole-of-market.

In such scenarios, the adviser would need to explain to the client that by taking a simple plan they may not be getting the benefits or level of cover that a standard or comprehensive plan may offer, explains Higgs.

He adds: “These products become another variation of an already complex range of products to choose from.

“However, those that need a quicker sales process may benefit from a shorter underwriting process and an easier product to explain.”

Critical illness products are by their nature complex and insurers are often their own worst enemies.--Alan Lakey

We spoke with a number of protection specialists to find out what works for them and what does not.

All agreed that the main benefit is a quicker application, but they added that this should not really matter to most advisers, as their focus will be on the best product and customer outcome.

That said, they did highlight some they use and find add value to the client.

Simple life cover