The Power Hour


wHy PeoPle Take ouT Policies in THe firsT Place. one of THe drawbacks To sHorT- Term income ProTecTion is THaT iT covers jusT one year. sHould THaT be a concern for advisers THinking abouT recommending iT To a clienT? P Brown: My view is that it should be an important consideration. Without wishing to be too doom and gloom, in this country 100,000 people die a year and 350,000 take some sort of disability benefit. There is a real need for protection there and it’s not just a need necessarily for two months, six months or 12 months, it can regrettably go beyond that. Now there are other ways of recognising that - the critical illness plan for example – but it comes back to looking at people’s needs. P Brodnicki: I spoke to a provider we use who said the average claim lasts five to seven months and for unemployment claims it’s six to eight months. That’s quite low. There are products like income protection that are more suitable for the long term. I think there’s enough


38 mortgage introducer JUNE 2011


flexibility in products out there already and customers can get good value for money.


wHaT sHould advisers be THinking abouT wHen recommending sHorT- Term ProTecTion versus income ProTecTion? RS: Establishing the client’s need is key to the whole thing. Borrowers should end up with a product they need and that product should end up doing what it says on the tin. It’s also about explaining to the customer that any product will have limitations around it. It’s that open and honest conversation which is hard to have with customers because we’re almost giving them a reason to say no to buying. That’s the big challenge for me in this: trying to refrain from this disclosure because we’re trying to make a sale isn’t helpful. We have to be brave enough to make it clear to the customer the benefits of a product while acknowledging there can be constraints. Sales will stick because customers understand why they’re paying a premium but the challenge is having people good enough to communicate that and customers who are bright enough to understand.


a combinaTion of regulaTion, cHanges in THe way THaT life offices are Taxed and caPiTal adequacy laws look likely To PusH THe Price of Premiums uP over THe nexT few years. THaT could imPacT on THe amounT of cHurn and rebroking of deals wHicH could see overall sales droP. wHaT is THis likely To mean? can brokers use THis To THeir advanTage as a sales oPPorTuniTy? P Brodnicki: I think premiums going up is going to make things very interesting. We’ve had 10 years of constant premium reductions which has encouraged higher churn and rebroking in my view. I think premiums have been predicted to rise between 10% and 15% which could prompt a slight drop in sales but I think we’ll get back to parity pretty quickly. PJ: If premiums do rise 10% to 15% it can only be a good thing in the long term for us as an industry and as a provider. We’ve had a sustained period where lighter premiums in particular have


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