Protection is an industry divided, yet the division is so ingrained many brokers no longer notice it. On one side, there is protection, primarily life insurance, critical illness cover and income protection. On the other, there is health, namely private medical insurance (PMI) and cash plans.
Some brokers have a foot in both camps, but many would never dream of crossing the line. Protection is protection, and PMI is PMI, and never the twain shall meet.
But is the industry drawing a dividing line that is not really there? What is to stop brokers crossing over to the other side, to offer clients the full range of protection and healthcare policies? ‘Holistic cover’ is what it might be called in another context. Is it time brokers dropped this division of labour?
And with the Retail Distribution Review prompting many advisers to rethink what products they advise on, could the landscape be about to change?
The similarities between protection and PMI are greater than the differences, says Nick Jones, brand and marketing manager at Exeter Family Friendly, one of the few insurers to offer both income protection (IP) and PMI.
“Both deal with the impact of ill-health,” he says. “PMI provides access to treatment, while IP makes sure you don’t lose financially.”
Advisers often overlook another link.
“The client’s income pays all the bills, including any insurance premiums,” Jones continues. “If illness strikes, how can they pay their PMI premiums if they don’t have IP?”
Advisers who refer protection or PMI clients to a third-party broker are taking a risk, Jones says.
“Many clients won’t relish being passed to another adviser, because they want one-stop advice,” he argues. “There is real strength in advising on both products yourself.”
With the right mindset, and support from insurers, intermediaries can bridge the divide.
“We offer a popular programme of seminars nationwide, primarily on IP,” Jones says. “More insurers are doing this, and advisers should take advantage. But you should only make the leap into another product area if you’re sure the client demand is there.”
Somewhat ironically, Exeter still maintains a clear division between its own IP and PMI offerings.
Customer and adviser attitudes
“The major challenge is finding a synergy between their target markets,” he says. “Our IP customers typically consider PMI an unaffordable luxury. By contrast, many of our PMI members have enough savings to self-insure rather than buy IP. There is little crossover between the two.”
While encouraging advisers to bridge the divide, insurers are clearly struggling to build a meaningful link between the two product areas.
Bupa, for example, sold its UK protection and risk business, Bupa Health Assurance in 2010, claiming it was not a “strategic fit” with its healthcare businesses.
Aviva also maintains the division, says Kevin Murdoch, senior proposition development manager for UK Health at Aviva.
“From an underwriting and risk perspective, protection and PMI are very different,” he says. “That makes it very difficult to fully integrate them.”
Murdoch argues that this is less of a problem for advisers.
“The sales process is similar for both products,” he says. “It all comes down to the client’s needs. The adviser just needs to know which clients to target, and the right questions to ask.”
Advisers should always be open to new markets, particularly if their current revenue stream is under threat.
“What is right for one intermediary won’t necessarily be right for another,” Murdoch says. “Anybody who is looking to diversify must also make sure the products are right for their clients.”
If you want to diversify, the help is out there, he continues.
“Aviva provides a host of support for advisers, including access to dedicated advisers within our sales support teams, and online information and guides,” Murdoch says.
Peter Chadborn, director at Plan Money, an IFA based in Colchester in Essex, is happy to stick to his core protection business.
“We don’t advise on PMI,” he says. “Never have, never will. We refer queries to a specialist adviser. I’m a big fan of outsourcing. If you try to do everything, you risk becoming a jack of all trades.”
In his opinion, advisers tempted to stray into a new area should ask themselves one simple question.
“Do you really need to spend the time on this?” Chadborn asks. “The worst thing you can do is sell the occasional policy every six months. It means you have to learn the subject from scratch. Markets develop quickly, ideas become rapidly obsolete. You can spend a whole day getting up to speed, when a specialist might only spend an hour or two.”
Advisers could use their time better by building up a reliable referral network, he believes.
“You need to build a good relation with another specialist,” he says. “If you don’t, and the client goes to an adviser who sells the full suite of products, you may lose that client altogether.”
It does not have to be a local specialist, Chadborn says.
“You can do most things by telephone or email these days,” he says. “We are based in Colchester, but I partner with a PMI specialist in Cheltenham, Brian Walters at Regency Health. We don’t share any remuneration. Mutual referrals enhance and maintain our relationship.”
Any adviser who does want to have a foot in both camps has to be equally serious about both.
“If you primarily sell PMI, and think you can slip a bit of critical illness into the client’s pocket, then absolutely no, don’t do this. You could make a major mistake, which could damage the relationship with your client,” Chadborn says.
Martin Howell, managing director at PMI broker MediSearch, has never sold protection, and always refers clients to a third party. But unlike Chadborn, he is having a rethink.
“The PMI market is going to get tougher,” Howell says. “We are considering supplementing our side of the business by selling protection. But it’s a big step. It requires a completely different approach, and a big change in the way we market and sell our products. We would probably start by selling a single protection product as a tied adviser, rather than advising on the entire market, and take it from there.”
In tricky economic times, advisers need to be open-minded.
“It takes a lot of money to acquire a client,” he says. “If you have a relationship with them, why not sell them another product? It could be protection. Who knows, it could even be general insurance. The expertise is out there, the difficulty is finding it.”
Paul Nugent, independent insurance consultant at Chase Templeton, sells both protection and PMI.
“This has helped us build long-term relationships and gives us an advantage over advisers who can’t satisfy their clients’ multi-product requirements,” Nugent says, adding that tying up products such as IP and PMI can also cut premiums.
“PMI gives the client speedy access to medical treatment, which limits the likelihood of a protection claim,” he says. “That’s why some providers offer reduced life, IP and CI premiums to policyholders who also take PMI.”
Any adviser can diversify, if they put their mind to it, Nugent says.
“It comes down to a question of effort,” he suggests. “If intermediaries are serious about building a business they should take the time to sit the necessary examinations and keep up to date with continued professional development.”
Paul Moulton, director of sales & client relationships at PMI provider AXA PPP healthcare, agrees that an adviser who sells both type of product can save their client money.
“Early intervention through PMI can support lower protection premiums in the long-term,” Moulton says. “That’s why I think it is better to sell both PMI and protection yourself, rather than having a referral arrangement with another adviser.”
Any division of labour should be kept within the company, he believes.
“Most active intermediaries in both spaces tend not to cross-train their staff but support them with technical experts from either side, if the sale becomes more complex,” Moulton says.
As ever, the devil is in the detail. Advisers should not underestimate the effort involved, because there is a lot to learn, says Matt Morris, senior policy adviser at LifeSearch.
“Especially in protection, which has a lot of small but very important technical details,” he explains. “Unless the adviser has detailed knowledge of a product, they would be wiser to develop a good third party deal and refer their clients on. It is better to refer clients to a specialist than advise on a product of which you have limited knowledge? The consequences of that can be severe.”
A bridge too far?
The division between protection and PMI is invisible, but it is also strong. You will not find it in any exam, but it is there in practice, says Kevin Carr at Kevin Carr Consulting.
“Providers keep things separate, for example, PruProtect and PruHealth [today], Standard Life and Standard Life Healthcare [in the past]. So do intermediaries. LifeSearch, for example, doesn’t sell PMI and Premier Choice doesn’t sell much protection. Even HI magazine is called Health Insurance & Protection. So there is undoubtedly a clear line, albeit a dotted one.”
The two products even run to different timetables, Carr believes.
“Protection products are generally long term with fixed definitions, whereas health products are typically one-year renewable plans,” he says, pointing out that even the application process is different.
“You usually apply to a different company or division, with different literature and different staff,” Carr says.
So should advisers cross the great divide? Fittingly, Carr is in two minds.
“I’m not sure they should,” he says. “On the one hand, the products meet different needs, and your client may require both of them. On the other, the two industries are so different, that being an expert in one certainly doesn’t make you an expert in the other.”
Selling both could make life simpler for the client and earn additional revenue for the adviser, Carr admits.
“But there is an argument for sticking to what you know,” he says. “PMI and protection are closely linked, but not close enough for advisers to make the switch overnight. If it was easy, they would be selling both already.”
Sometimes invisible lines are the most difficult to cross. The division between protection and PMI looks set to remain, with only a few brave advisers checking out life on the other side.