"We must speak in simple terms/everyday language, become less hung up on the mechanics of products, and talk more about the practical benefits of protection."
Recently, Cirencester Friendly reported that 57% of adults in the UK would consider buying a product that paid an income if unable to work through accident or illness. Notably, three in four (74%) of those surveyed aged 34 or younger stated that they’d be interested in purchasing income-related protection. Only 13% of this age group said they wouldn’t consider buying it at all.
Unfortunately, these potential customers don’t have a clue what protection does until an adviser explains it to them, or they decipher one of our many brochures which (to those outside the industry) might as well have been written in Latin.
“We think Income Protection (IP) is simple, a product to protect policyholders’ income. But does the customer understand its purpose?”
IP was originally called Permanent Health Insurance, but in today’s world, that term would have caused confusion. Firstly, it’s not permanent, and policies wouldn’t have included any specific provision for private healthcare. Is there scope for a product like that?
That’s a thought for another day.
Any protection product should say what it does in simple terms. IP pays a regular sum of money, equivalent to a percentage of the policyholder’s income, in the event of ill-health or injury resulting in the inability to work their job or occupation and subsequent loss of income.
“In simple terms, that means it pays your bills if you can’t work due to ill-health or injury.”
But that’s the ‘sausage’, what’s the ‘sizzle’? It’s the regular sum of money to pay household bills and put food on the table when income has stopped or reduced. In other words, IP protects day-to-day life – so why’s it not called Life Insurance? This would’ve been a great name if it hadn’t already been taken. But even that isn’t the right name for Life Insurance. It pays at the end of life, so shouldn’t we replace Life Insurance with End-of-Life Insurance? That certainly says what’s in the tin but sounds a bit grim. I doubt many advisers would relish selling it.
“Thinking about product terms in the protection space, none seem quite right.”
Take Critical Illness Cover (CIC). Conditions don’t have to be ‘critical’ to receive a payout. Let’s not go down that rabbit hole, I feel like I’m losing my point. Providers often attempt to reduce confusion by calling IP products imaginative names. At Cirencester, we call our IP offering My Earnings Protected which works for a singular product, but ‘Earnings Protection’, for example, is no different to IP.
Why are we even worried about this? Ask anyone what a mortgage is, and they’ll probably tell you it’s a loan to buy a house. But the term itself is French, meaning ‘dead pledge’, referring to the fact that the pledge will be over once the debt is paid. Who knew?
You could say IP shields life from the financial impact of ill-health or injury. The French word for life is ‘vie’ and shield is ‘bouclier’. So, that’s ‘Viebouclier’ – not very catchy, is it?
“Then there’s the small matter of persuading the Financial Conduct Authority (FCA) to change the name for regulatory purposes.”
I fear we’re stuck with the term IP, for now. What we need to do is explain the product in marketing, advertising, advice processes, and terms & conditions (T&Cs). We must speak in simple terms/everyday language, become less hung up on the mechanics of products, and talk more about the practical benefits of protection.
