Hi everyone and welcome to this week’s protection update – Friday 1st July. Half way through the year. Time is flying fast.
It’s been a busy week for me but it has been great to see so many of you at the protection and GI roadshows round the country.
In between all the roadshows, I nipped down to London to the CI Expert 10th year anniversary.
I actually remember when they were trying to get CI Expert off the ground and it was really difficult for Alan and Clive to get all of that historical critical illness policy data but they did eventually get the system launched and it’s been a fantastic financial advice tool for this past decade.
Now you should have seen a communication from me, and if you were at any of the roadshows; I would also have mentioned the fact we’ve got a very special offer for advisers within our network.
Basically, you can sign up for CI Expert for the next 3 months for a vastly reduced cost of £10 per month plus the VAT. It’s not a 12-month contract; it’s a 3-month contract and that will give you a really good opportunity to try it out.
Around the country we’ve got advisers such as Simon Walton from Protex; Simon Warren from Joshua Jacob, Adam Scott from Kismeet, Alan Whitworth from Mortgage Matters and several others of you who use CI Expert as part of your advice and recommendation process.
You’ll know that the normal trial period for CI Expert is just 24 hours which never felt long enough – well now you’ve got 3 months to really give it a go.
Now in July; we will be running some drop in live webinars where you can get to see how it works in practice and you’ll also get some really interesting positioning about why this is such a powerful tool. CI Expert are running these webinars especially for the Right Mortgage. They will also be presenting at the July Technology Masterclass so there’s plenty of opportunities to get up to speed with how to use it.
I’ve added the registration links to this weeks protection update.
Indexed policies
Now I had a note from Leigh Bass this week at the Right Broker and he mentioned the potential current issue with index linked policies.
You might recall that I mentioned this a few weeks ago, but I do think we need to get on the front foot with the issue.
What is the issue?
The issue is that the vast majority of protection policies we add indexation to use Retail Prices Index. Yes, you can pick a percentage, but we don’t typically do that very often.
And the issue is that inflation is just about to breach 10%. It could very well go up to 11% quite soon.
RPI is a variable figure and it’s designed to allow you to keep up with the cost of living.
But did we really expect that inflation would skyrocket in the way it did? Probably not.
But the effect this is going to have for those RPI policies is that the increases to cover and the increases to premiums could be quite significant.
Let me give you an example…
Many/if not every provider uses a premium increase factor.
What that means is the premium will increase at a higher rate than the rate of the indexation.
So let’s say you’ve got a policy which has a sum assured of £100,000 and the premium is £40 per month.
If you’ve chosen RPI as your indexation rate; the cover will increase by the rate of the retail prices index; usually subject to a maximum. Typically say 10%.
So if RPI is 9% now and it’s time for the increase to be applied to this policy, the cover will go up by 9%. So from £100,000 sum assured, it becomes £109,000.
But the rate the premium goes up is higher than this.
Working on the basis of a premium increase factor of 1.5%, let’s do the math’s.
The premium of £40 is multiplied by the indexation rate. That’s RPI which we know in this example is 9%. That’s an extra £3.60 per month. But then you multiply that by the premium increase factor of 1.5 which takes you to an extra £5.10 for this extra amount of cover.
What happens if inflation stays high for a few years?
Well working on the basis of the 9% inflation rate; the starting premium is £40 per month. At the first-year anniversary it goes up to £45.10.
On the second-year anniversary it goes up to £50.65
And in year 3 it goes to £56.71. That’s nearly £17 per month more in quite a short space of time.=
Under normal circumstances, none of this is a problem when the inflation rates are really low, but it’s not normal circumstances and these costs could spiral out of control as Leigh commented this week as he’s got clients who have experienced these big hikes in price.
We need to manage this with some of our clients because people are going to start feeling the pinch.
If you need lists of your index linked clients, you should be able to extract these from the Key or, you could ask for them from the providers.
I’ve asked the providers centrally how easy this is to sort out and I’ll come back to you next week with an update.
I’ve added a link to my previous protection update where I talked about this recently, and I’ve also added a link to the indexation calculator. It’s quite straightforward to understand but call me if you need any help.
The power of added value benefits
Now the last thing I wanted to talk about is a story which; if you were at the North East Roadshow last week, you would have heard.
Debbie Bonser is a BDM from British Friendly and she shared her story about what happened to her at the start of the pandemic 2 years ago.
She found a small lump and went to her GP.
The GP’s advice was to wait for a few months and come back if it worsened.
What would you do in a situation like that?
Would that be enough to satisfy you? If not, what course of action could you even take?
Carl Heard who is my national account manager from Liverpool Victoria recently guest presented my weekly protection update and he spoke specifically about the value of added value benefits. It’s worth a listen if you missed it and I’ve added a link to this week’s protection update. It’s not a product push but really just a few ideas about how you can position this with your clients when you make your ‘on risk’ call… What’s that? Take a look at the protection update…
I digress but let me ask that question… would you be satisfied if your GP suggested that course of action to you?
Debbie went home and spoke to her husband that evening and she wasn’t happy. She didn’t want to just leave it for a few months and see what happened next.
So she used the second medical opinion she has built into her protection policy.
She got a consultant appointment straight away and Debbie was advised to have a scan.
The result of the scan showed she had stage 2 breast cancer…
They operated shortly after and Debbie was able to get on the road to recovery.
That was a couple of years ago. When she told that story, she said that if she had left it; she might not have made it to our roadshow up in the north east.
What she meant is she might have died if she left it to chance.
We need these stories to remind us about the power of these protection policies. They aren’t all the same and you’re in the position of making sure your clients have the best cover they can afford to pay for that meets their needs and circumstances.
Think about your sales process and the tools you use. They have never been so accessible as they are right now and the great thing is someone else has done all the hard work.
Whether it’s risk reports to show you the chance of claim.
Product features reports by Protection Guru; all built into Solution Builder and free to use.
Protection Guru Pro which gives you that deeper dive into how all the scoring works and why some products and features score higher than others. Remember there is a special offer right now that will give you FREE access to Protection Guru Pro for the next couple of months.
Or CI Expert as I started talking about at the beginning of this week’s protection update.
Take a look at what’s in your toolkit!
Have a great weekend everyone and I’ll see you soon.
