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Top 10 Tips to advising of individual income protection

Some financial advisers remain reluctant to start selling income protection (IP) insurance to individuals as they believe – mistakenly – that it is overly complex. Here, two specialist IP providers give their ten top tips to selling what many believe should be the bedrock of all financial planning

November 2008 News

1 It’s a question of priorities

Income is the foundation from which all outgoings, including all other insurance premiums, are paid. Therefore, it should be at the top of the pile in terms of protection priorities. Paul Wood, intermediary sales director of insurer Pioneer, says: “If you don’t open the debate until after the life or critical illness insurance is sold, the consumer will naturally question its importance.”

2 The earlier the better

Investigate IP early, says Wood. “Don’t let your client wish they had at least some IP before it’s too late. If affordability is a real issue, compromise and get the best level of cover you can achieve – look at reducing costs through reviewable premiums, longer deferred periods and age costed premiums,” he explains.

3 Understand the variety of products on offer

Some IP products cost more if your clients smoke, have an existing medical condition, enjoy hazardous pursuits, have a certain type of job – or even if they are female. However, some don’t. Paul Hudson, chief executive of IP provider Cirencester friendly, says: “There are products available for customers who have been rejected on any of these grounds previously or who have faced steep premiums.”

4 PPI: friend or foe?

The ongoing bad publicity within the payment protection insurance industry could be friend or foe to the IP adviser, depending on how you look at it. Pioneer’s Wood says: “Make it your friend, by using the inevitable publicity and consequent consumer doubt to raise the stock of the quality comprehensive alternative. In addition, look to those who have been miss-sold PPI as a potential new sale for I P.”

5 Explain the reality about state benefits

Make clients aware of what they would receive from their employer and the state if they are unable to work. They, and you, may well be surprised. Did you know statutory sick pay for the employed and incapacity benefit for the self-employed is only £75.40? Cirencester’s Hudson says: “Furthermore, some state benefits are means tested so there is no guarantee anything will be forthcoming from the state.”

6 Don’t just fight like for like

Affordability of insurances shouldn’t always come down to a straight choice between covers, says Pioneer’s Wood. “Inevitably, all household expenses come from the same pot, so ask your clients questions such as ‘what do you really need more, financially security or your Sky Box?’ It really is as simple as that,” he says.

7 Build confidence in the sale

Confidence breeds confidence. You’re unlikely to sell anything if you don’t believe and aren’t confident in your approach. Use an IP provider’s business development manager as a centre of excellence for training you and your sales team. Many will provide a whole lot more than simply product information, according to Pioneer’s Wood.

8 It’s not just new clients

As providers innovate and IP policies improve, there is a huge opportunity for a win/win scenario – re-broking, says Pioneer’s Wood. “Your clients win in that you may be able to update their IP to a more comprehensive, simple or affordable solution, while you can add a new profitable income stream,” he says.

9 Focus on your target audience

Cirencester’s Hudson says careful targeting is essential: “After sifting the existing client base consider alternative sources of new clients. Good local networking goes without saying but also consider employers, clubs and associations in your area. Establish a named and respected contact to serve as an introduction and then work up a well-produced mail shot that would appeal to the target audience.”

10 Explain that IP can be flexible

Not all IP providers lock clients in to an inflexible contract. Cirencester’s Hudson says: “Some providers offer very flexible contracts with a wide range of options allowing your customers to vary the terms to meet their needs: such as an investment option that can be added when disposable income rises and their priorities change or when IP isn’t needed in which case clients can switch to investment only after two years premiums have been paid.”