Holloway Friendly has launched a new income protection product aimed at low-risk occupations, as part of a strategy to diversify its product portfolio. Actually, it replaces an old product of the same name but think if it as a new BMW 3 series with new engine options.
One2protect is aimed at employees in occupational classes 1 and 2, including office workers, estate agents, accountants, solicitors and beauticians, among others, and includes six variants to facilitate tailored solutions for individual client needs.
The revised plan offers both ‘Level' and ‘Age Costed' options, and benefit payout periods of one year, two years or to selected retirement age. Premiums (minimum £5 a month) are guaranteed for the first five years, then reviewable annually.
Reviewable premiums are often seen as a negative, but the case for them is that premiums are cheaper (if not, don’t do it…). That’s because otherwise the actuary has to build in a margin in case things turn out worse than expected. But if, say a reviewable premium is 20% cheaper today and (as on this product) the first review is after five years, the reviewed premium would have to go up by more than 25% to be higher than the guaranteed premium and, in the meantime, the customers has had 60 months of paying 20% less. Given that the average IP policy lasts less than ten years, the ‘risk’ to the customer is relatively low. Many clients also expect insurance premiums to go up – it’s what happens on the insurance policies they’re most familiar with – household and motor, and even with their fixed rate mortgage and internet deals and just about anything else they buy on an ongoing basis.
One further factor (an one that would not have applied say 20 years ago) is that if an insurer ‘cheats’ by setting its reviewable premiums artificially low, it is likely to feel the wrath of the FCA when they go up at every review. Quite rightly insurers are expected to treat their customers fairly, and this and conduct risk rules are all part of that.
All of that assumes the client is happy their premiums could rise in future and, as an adviser, it is vital to not only explain that but also to record it.
Other plan benefits include a Guaranteed Insurability Option for renters whereby customers can increase their level of cover should their rent increase, or if they move from renting to getting a mortgage, all without further underwriting.
Customers can cover up to 60% of their income, to a total of £5,000 a month. There is also an automatic benefit guarantee where a customer is guaranteed to receive the amount of cover they have chosen, up to £1,500 a month, should their income drop after starting the plan.
Deferred periods of 1, 4, 8, 13, 26 and 52 weeks are available. Premiums can be stopped for up to six months if the customer is made redundant, goes travelling or is on maternity or paternity leave after they have had their plan for three years.
As of 15 March, Holloway has also dropped its previous COVID-19 exclusion, except on one week deferred plans.
During a claim, the customer can apply for a payment to be used towards the cost of a medical operation or treatment their doctor thinks will lead to faster recovery. This is discretionary, so Holloway will decide if it can make a contribution after consulting with its chief medical officer (CMO). The customer will then need to provide evidence that the payment was used for the operation or treatment. Holloway’s CMO can also authorise a terminal illness benefit (six months’ benefits in a lump sum) if life expectancy is less than one year.
Hazardous pursuits can be included or excluded at the customer’s request and Holloway says it will review them if the customer’s hobbies change, so they’re not paying for something they no longer do.
Rehabilitation and proportionate benefits are included as is a Member Assistance Programme. The plan is available from ages 18-59 at outset and selected retirement age can be any age between 50 and 70. Only certain occupations are accepted and pre-existing medical conditions are excluded.
Comment: The Holloway really is the original IP provider (and who else can claim to have a statue of their founder at a major railway station?) and it’s good to see it’s still coming up with good ideas.
In order, presumably, to be able to offer more competitive rates, this plan is aimed at low risk occupations only. There is a good range of deferred periods available and the plan includes some useful features.
Premium rates are a bit guaranteed (for the first five years) and a bit reviewable (after that), which some may see as a disadvantage. Premiums can also be age-costed or level. Both options are a bit marmite, but a case can be made for them in the right circumstances and with the right client so personally, I’d never dismiss either.
Friendlies do sometimes include ex-gratia style benefits and this is clearly a benefit, although is clearly not guaranteed. You really do have to trust the provider in such situations. The plan has a relatively limited market but is nevertheless a very useful addition to the IP sector.
Plus points: A traditional friendly IP plan aimed at low risk occupations; Low premium rates; Update of an existing plan, with a lot of changes; Choice of premium system; Ex-gratia benefits; Guaranteed insurability for renters; Member Assistance Programme; Premiums guaranteed for the first five years
Not so plus points: Premiums could rise after five year, when reviews are annual; Selected occupations only; Excluded pre-existing conditions; Some cover limitations; Some elements of the old plan are no longer available.
Rating (max 10): Overall: 8. Gold
Tags: IP; Holloway Friendly
I Mark: No
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