Menu products outsold conventional products for the first time last year since their inception in 1996, and increasingly advisers are realising the advantages for their clients, and the opportunity for repeat business by using menu options for healthcare.
There are a number of providers in the market, including Liverpool Victoria, Scottish Equitable Protect, Friends Provident and newcomer Bright Grey, part of the Royal London Group (see box inset on page 34). Although the principles behind each company’s offering are the same, there is still a lot of research to do on the part of the adviser to make sure that their client gets the best deal.
Nigel Snell, of Liverpool Victoria, says: “Menu products are flexible. Customers can choose from any or all of a range of different options, and they can adapt to a customer’s changing circumstances. For example, with Liverpool Victoria’s Mimi protection product customers can choose any combination of life assurance, critical illness, income protection and unemployment insurance, so there’s less administration for them and the IFA and just one contract and one premium to pay.
“The cover can also change and adapt as the customer’s lifestyle changes, say, to add or remove a life, or to increase the sum assured to a guaranteed level without further underwriting. Menu driven products came about to address the need for flexibility and adaptability in the marketplace. IFAs were finding that clients had bits and pieces of policies all over the place and the menu product was a good way to rationalise and simplify this for all concerned.”
Making the sell easier
Selling protection products has not always been easy for advisers, as it is often difficult to try and portray to a customer, particularly a new client, the sort of worst case scenario for which the protection products cater. Most of us like to think that we are invincible, and it has been difficult for advisers to grasp the nettle and tell clients they are not. But making this conversation easier to broach is one of the strengths of the menu offering.
Peter Hamilton, of Friends Provident – which offers waiver of premium on stakeholder and personal pensions within its menu offering, comments: “The IFA can offer one plan covering the core protection needs – life cover, critical illness cover, income protection and unemployment cover. Many clients will need a range of financial protection. A menu product helps to put the choices in front of the client and provides an agenda for future review meetings. One application form means all the benefits are underwritten together. One brochure and one key features document can set out the options clearly for the client and keep the process simple for IFA and customer alike.”
Tailor your benefits
Universally, the one primary advantage identified by all is that the menu option gives clients the flexibility to chop and change their cover as necessary, with a minimum of fuss, and underwriting.
Lesley McPherson, of Scottish Equitable Protect, said: “Instead of being stuck with a fixed amount of cover for a fixed term, clients can increase and decrease amounts, add and take away benefits. The key is they provide a tailored solution to the needs of individuals and their families.
“Also, the menus can grow with an individual. For example, if a first time buyer takes out life and critical illness cover, he can then add on income protection when he can afford it, and later perhaps add on spouse cover, family cover and so on.
“Individuals can increase or decrease cover and premiums as their circumstances change. There is also a cost saving by taking out one or more covers on the one policy.”
One other primary advantage for both the adviser and client in the sales process, says McPherson, is that by having all of the protection requirements covered by one menu product it makes it easier to crystallise the client’s awareness of the amount of cover that they have.
She explains: “It can make them more aware of what they are and are not covered for, which is important as many people are confused about what policies they do and don’t have.”
The main selling point for these policies is that they are cheaper than buying conventional products separately as most companies will offer a discount on menu products, which is not available by buying the same products individually.
Nick Kirwan, of Scottish Provident, which describes itself as a “pioneer” in the menu market after launching its Self Assurance policy in 1996, comments: “Menu products are excellent value for money and really come into their own when combining more than one benefit in one plan because the more benefits you take the more discount you attract. People looking ahead and thinking that they will add benefits later will also enjoy that increased discount when they increase their cover. “In the case of Scottish Provident, Self Assurance offers more cover today than ever before, and more than you would get if you had individual policies with different providers through our new synergy benefits – Children’s Income Benefit & Immediate Cash Benefit – both included free when you choose Disability Income Benefit and at least £25,000 worth of critical illness cover.”
He continues: “Regardless of what benefits have been chosen at outset the underwriting is the same. This means that further down the line if other benefits are added the need for further underwriting is kept to a minimum. It’s therefore easy to add extra benefits to menu plans.”
Although many of the products offer the same basic cover, there are a number of bells and whistles that individuals can get with some providers that are not available elsewhere, so it is best to research the market before plumping for a policy that may not be the best for the client.
For example, Scottish Equitable Protect, Friends Provident and Liverpool Victoria all offer unemployment protection, which would be particularly useful if sold alongside a mortgage. Liverpool Victoria also has a “buy back” option. Snell explains: “If a client has £50,000 life and critical illness cover and becomes critically ill the policy will pay out the £50,000. If they had taken the ‘buy back’ option when starting the policy, and survived for 12 months after the claim, they can then buy back life cover at their current age, but without the need for further medical underwriting.
“Whether more underwriting is necessary if the client adds products later on depends on the circumstances and also whether it is a ‘guaranteed insurability’ option. Mimi has a guaranteed sum assured increase limit, which on a specific event can be taken with no further underwriting. If someone wants to add a life, there will obviously be an underwriting requirement.”
Bright Grey has only recently entered the market, but has set out its stall as trying to be clear and concise in its menu product cover. It is attempting to promote healthy living to its clients, as well as covering them in the event of illness. (Read the product review on page 25 of this month’s issue).
Roger Edwards of Bright Grey says: “Our products are about much more than financial benefits. We’re promoting healthy living through a range of benefits and offer practical advice and treatments to aid the recovery of those who claim.
“Protection products have often been tarnished with marketing messages that focus on the implications of death, disability and disease. We want to move the proposition away from this grey message and focus more on the positives of recovery, fitness and health. Of course, we’ll pay out to protect customers against the financial impact on their lives of critical illness, unemployment, sickness and death, but we’ll also give them access to experts and treatments that will speed their recovery.”
Edwards adds that the company is encouraging people to live more healthily by offering a range of benefits and discounts on products, as “it’s in their interests to avoid having to claim in the first place”.
Bright Grey menu plan holders can get trial membership, and pay no joining fee, at Livingwell Health Clubs across the country. They can also get discounted personalised health assessment from BMI Health Services, and discount on first order with Abound Home Shopping.
Also, when “Income Cover for Sickness” ends Bright Grey plan owners are given the option to continue it as “Care Cover”.
Says Edwards: “The product is coupled with a customer proposition that offers simplicity, flexibility, transparency and honesty. It will also offer good value and will be competitively priced.”
Another feature that is helping IFAs fit extra work into their busy schedule is electronic applications, and some menu providers are already geared up for this.
Hamilton of Friends Provident comments: “Increasingly, business will be done electronically. Friends Provident has a ‘Portable Application Component’ available on the major portals. These are essentially electronic application forms. While most companies have individual electronic forms for individual products, I’m aware of only one other company offering electronic submission for menu based products, although the availability of such facilities is likely to increase.
“The benefits include fast turnaround – for electronic business we can often process ‘clean business’ the same day, and if any form of underwriting is needed we offer a decision in 48 hours, either acceptance on ordinary rates or perhaps calling for additional medical evidence. The electronic form includes built in validation. Some 40%-50% of paper applications include some kind of error – these are pretty much cut out with electronic processing.”
Scottish Provident also offers online facilities to IFAs, and while Liverpool Victoria has online transactions available for its standard products, the online menu offering is currently in the process of being set up.
Sounding the retreats
Advisers and clients could be forgiven for thinking that menu products are a panacea for all protection needs, but these products do have their detractors. For example, Penny O’Nions, a specialist healthcare adviser with intermediary The Onion Group, describes them as a “necessary evil”.
She says: “The big drawback is that the best policies are not available from one provider. You can’t have an all-singing, all-dancing scheme that is perfect. What you get is a discount. If you can handle the disadvantage of shopping around and having umpteen different direct debits going out, it is far better to go to individual companies for your cover.”
The providers acknowledge that this is a problem. Hamilton of Friends Provident, points out: “It’s obviously important that the provider has a credible offering in each product area. A provider may offer an apparently cheap package but include, for example, income protection with restricted disability definitions.”
In some cases, the bells and whistles on offer from various companies will add cost without necessarily adding value, adds McPherson of Scottish Equitable Protect. These can be seen as gimmicks to sell products, rather than useful add-ons. Other criticisms include the assumption that the products have been set up more for the company selling them, than the customer buying them. But that is firmly rebutted by the providers.
Kirwan of Scottish Provident says: “Quite the reverse. Self Assurance was designed with the customer at the centre of the development process. There are administrative savings with this type of product but Self Assurance passes these back to the policyholder in the form of premium discounts for holding more than one benefit and extra cover through our new synergy benefits.”
“We don’t believe that is true [that menu products suit the needs of the industry rather than the client],” adds Snell of Liverpool Victoria. “Our Mimi product offers customers choice and flexibility, and can adapt to their changing lifestyle and circumstances, with less paperwork and admin for them or their IFA.”
Administration has always been an area that has attracted complaints from advisers and Bright Grey is determined that it will do its utmost to cut out these sorts of problems, so the advisers can get the most from its services.
Edwards explains: “Bright Grey’s distribution model has been designed to provide a consistently high and dependable service to intermediary partners. The traditional broker consultant is replaced with the combination of a small team of partnership directors and a head office based customer care team. The customer care team have the expertise, knowledge and authority to ensure that the intermediary gets the level of service needed to do business profitably. The partnership directors will work hand in hand with intermediaries to develop and grow their business, replacing the traditional sales team and shifting the focus from sales to service.”