2 October 2017
Time to start the protection conversation
Welcome to my blog where I aim to share all things protection with you, highlighting and discussing issues that impact on consumer need for improved financial resilience and access to appropriate protection advice, solutions support services and rehab interventions.
A recurring issue, especially with advisers who do not specialise in protection, is “How do I start a protection discussion with clients?”. In my experience, one of the easiest ways to evidence the benefits of protection with existing clients is to link it to changes in other financial circumstances. This can be as simple as a salary increase, although things like a new loan or a mortgage change mean that protection needs may well have changed too. In this respect, protection should be the cornerstone of all financial advice.
Many protection plans today are flexible, which means a client can adapt cover at any time during the policy term without having to cancel the existing cover. So, as clients' lifestyles and protection needs change, so can their cover. It is also important to check what cover your clients hold with their employers - which is often a lot less than they think.
With mortgage clients, old and new, try asking.. “Would you rather lose your home or your mortgage?”
It certainly makes people think. Our own research shows only a fifth of the UK's mortgage holders have a critical illness policy, leaving millions at risk of financial hardship or losing their home if they were to become seriously ill.
Compounding the situation is the change to Support for Mortgage Interest [SMI], which is the only safety net in place for many families if they were unable to pay their mortgage. People now have to wait 39 weeks before receiving this benefit instead of the previous 13, which could be too late for many if they have no other protection in place.
Furthermore, from April 2018, the government plans to make SMI a loan, with a charge being taken on the property. This means homeowners have to pay back the amount of mortgage interest the State paid for them - either when they return to work or when they sell their home. The change will impact both SMI claims in progress and new claims, making this issue relevant to all mortgage clients.
As health charities are increasingly flagging, life changing health events all too often have a financial consequence so don't be afraid to use the ‘C' word and talk about how critical illness impacts.
Cancer may not sound like the most appropriate way to start a conversation but it provides a very valid reason to have a financial resilience discussion with clients, both old and new.
A report last year by Macmillan - Cancer: Then and Now - celebrates advances in cancer treatment and care, with people, on average, now twice as likely to survive at least 10 years after being diagnosed with cancer than they were at the start of the 1970s.
As the following table shows, cancer was the biggest reason for critical illness claims at Scottish Widows last year, accounting for 76% of claims by women - of which 52% were due to breast cancer - and 55% of claims by men.
2016 Scottish Widows - Critical Illness claims
| Cause of claim - men |
% of claims |
Cause of claim - women |
% of claims |
| Cancer |
55% |
Cancer |
76% |
| Heart attack |
21% |
MS |
7% |
| Stroke |
8% |
Heart attack |
5% |
| MS |
2% |
Stroke |
5% |
| Other |
13% |
Other |
8% |
Note: Percentages have been rounded. Source: Scottish Widow, based on the number of Critical Illness cover claims paid out by Scottish Widows between January 2016 and December 2016.
We need to ensure that people who have had cancer or who are living with it have a good quality of life and tailored, appropriate support. And critical illness cover can provide a significant financial boost at a time of emotional stress and financial difficulty, and can really help families who are struggling to come to terms with the impact of the illness.
“Plan B”….
It’s important that clients have an appropriate financial resilience and protection back up plan. Welfare reform has not featured too highly on intermediaries' agenda for discussion with clients but now is the time as this issue is increasingly attracting media profile and debate. Significant changes to benefits such as child and working tax credits, income-based jobseeker's allowance, income support and housing benefits for those renting and with mortgages - all of which are being replaced by ‘capped' Universal Credit - mean families need to do all they can to protect themselves.
With a new ‘bereavement support payment' system in place now too, it is more important than ever to review financial protection needs. Indeed, according to research from the Childhood Bereavement Network, it is estimated 91% of widowed parents will be supported for a shorter period of time than they would under the previous system.
State welfare is the only safety net in place for many families. At the same time, fewer employers are offering sickness benefits and almost one in six workers are self-employed, raising the question of how they will cope with their commitments when sickness strikes.
There is little doubt a short protection discussion can deliver long-term benefits – I’d welcome your feedback, find me on Twitter or LinkedIn.