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June 2015 Holloway Friendly: IP

Holloway Friendly is the original disability benefits insurer in the UK and its new hybrid plan pays up to 60% of gross income (up to a maximum of £120,000 a year) if the customer can’t work because of one of the specified critical illnesses. The benefit is paid monthly and there is a choice of 4, 13 and 26 week deferred periods. The plan can run to any age between 50 and 70 inclusive and the maximum age at the start is 54.

Benefits can go up each year in line with increases in the Retail Prices Index (RPI) up to a maximum of 10% a year and exclusions are fairly standard for IP type plans. The policy also includes proportionate and rehabilitation benefits, a career break option (suspending cover up for to 6 in any 12 month period and up to 24 months in total), a terminal illness benefit (which must be claimed within a month of diagnosis) which pays six months’ benefit on being diagnosed, but the plan then ceases with no further benefits paid, and a discretionary lump sum (called Medical Expenses Benefit) may be paid and used towards the cost of a specified operation or treatment if it is medically likely to lead to faster recovery.

Holloway’s incapacity definition on this plan is: ‘The total inability to perform all the essential duties of your own occupation and that you are not following any other occupation for profit or reward.’ The critical illnesses the plan pays out on (if unable to work) are: cancer; coma; heart attack; Alzheimer’s disease; aorta graft surgery; benign brain tumour; blindness; coronary artery bypass graft; deafness; heart valve replacement; HIV; kidney failure; loss of speech; loss of hands or feet; major organ transplant; motor neurone disease; multiple sclerosis; paralysis of limbs; Parkinson’s disease; stroke; terminal illness; third degree burns, and traumatic head injury.

There is no limit to the number of claims that can be made and members also have access to the Holloway Members Assistance Program. This makes available information and assistance across a wide a range of health and non-health situations.

Comment: CI and IP should be a powerful combination, but only if the plan incorporates the best of both. This plan is similar to conventional IP in that it pays a monthly benefit if you can’t work but, while IP will pay out regardless of the cause (pretty much) this plan only pays if the reason you can’t work is because of a critical illness. If, say, you have had have cancer treatment or if you are in remission, the plan is unlikely to pay out, whereas conventional lump sum CI cover would. So, forget the appeal of CI and IP combined, this uses each plan type to restrict the chance of claiming rather than maximising it.

It’s not all bad news – if say you have a stroke and can never do your own occupation again, then not only would the plan pay out, but it could do so for years and you could end up with more than you would have done from a lump sum CI plan and you’d have paid less in premiums than on a full width IP plan. But the risk seems largely to be taken by the customer and it’s key that customers and advisers understand this plan provides less rather than more cover than conventional IP or CI in many situations.

One upside is that such cover should be a lot cheaper than a full width IP plan. And certainly, no one can claim to have more experience of IP than Holloway as it’s been in this market from the very beginning back in 1880.

Overall though, there are some serious concerns about this type of cover – especially around communications and what the customer (and maybe even the IFA) understands.

Plus points: Hybrid CI/IP concept; Could pay a substantial sum over time if someone cannot work because of a specified CI that stops them working; Lower cost than conventional IP; Holloway is the original IP provider – with a pedigree going back to the start in 1880.

Not so plus points: CI and IP but the worst of both worlds?; Only pays if the customer is off work and that is due to one of the specified CI’s only; Does not pay out for the main causes of IP claims; Customers may easily misunderstand the extent of the cover; Benefits stop if a terminal illness claim is paid, regardless of how long they survive: RPI only link, when an income index may be more appropriate’ No waiver of premium benefit.  

Website: http://www.holloway.co.uk.

Rating (max 10): Innovation: 7. Overall: 5. Bronze

Tags: IP; Holloway Friendly