"Today, the surplus sharing provides a unique selling point for advisers to market to their clients and sets Holloway products apart from pure IP contracts."
What does this mean in reality? Simply, who owns the provider? Is it a ‘mutual’ (member owned) or ‘proprietary’ (shareholder owned)?
It’s important to ask what advantages a mutual might offer over a proprietary provider and key to choosing any IP provider is, will it pay a claim? Mutuals have a long and enviable record when it comes to paying claims and have been transparent about their claims histories for many years.
Mutuals are also renowned for being customer centric and often provide additional benefits. They put their customers and supporters at the heart of every decision. This means offering affordable IP and sharing profits with members in a variety of ways to deliver even better value for money. An example of this can be seen in Cirencester Friendly’s 125 Foundation, which was created to provide financial support to people and projects that are important to our members.
Friendly Societies are mutuals and emerged prior to the development of large-scale Government and employer financial services. Whilst they tend not to operate on the same scale as their listed counterparts, they rarely attract unwelcome criticism for their business ethics.
A select number of Friendly Societies offer two distinct types of IP:
• ‘Holloway’ style income protection
• Pure income protection
Under current legislation, the ‘Holloway’ style contract enables the insured to build up a tax-free cash lump sum that is available - without any penalty - on the maturity of the contract.
For those unfamiliar with Holloway contracts, they were put forward by the 19th century businessman and MP for Stroud, George Holloway. He was concerned about the welfare of workers during times of ill health, injury and retirement. At the time, the investment aspect of his proposition was designed to provide some financial security in retirement, before pension schemes became widespread, or to cover funeral costs.
Today, the surplus sharing provides a unique selling point for advisers to market to their clients and sets Holloway products apart from pure IP contracts. Although originally a compulsory element of these style contracts, many providers now offer the surplus sharing element as an option which can be added or removed at any point.
The focus on delivering results for members and advisers is the key driver behind the continued endurance of a model that has not only survived, but thrived for over a hundred years.
