Scottish Widows’ new bank branch adviser only Plan and Protect product is an innovative new life and/or critical illness product range designed to make it easier for homeowners to protect themselves and their families. The particular focus is on mortgage cover, but the plan can be used for other protection purposes too.
The application process is simple and clear with just seven health and lifestyle questions, and it takes just 20 to 30 minutes to get on risk. Maximum benefit is £500,000.
Customers can choose to have standalone Life Cover or Body (critical illness) Cover, or combined Life and Body Cover. The plan has been trialled across one of the Halifax branch network regions since October 2018, and is now available to the group’s UK mortgage and protection advisers in Halifax, Bank of Scotland and Lloyds branches.
The plan’s key product features are:
• Life Cover: This pays a cash lump sum if the customer dies.
• Decreasing cover can be chosen to protect a repayment mortgage, when the mortgage interest rate used is 8% (the higher the rate the slower the sum insured falls, so this is a good compromise rate to use).
• Body Cover. This is the plan’s critical illness cover and pays a cash lump sum if the customer is diagnosed with one of: aorta graft; bacterial meningitis; benign brain tumour; cardiac arrest with defibrillator; CJD; coronary by-pass; dementia; Devic’s disease; early stage cancer; encephalitis; heart attack; heart valve repair/replacement; invasive cancer; Kennedy’s disease; kidney failure; loss of hand/foot; major organ transplant; motor neurone disease; multiple sclerosis; open heart surgery; paralysis; Parkinson plus syndrome; Parkinson’s disease, stroke, and traumatic brain injury.
• The plan is available for customers from age 18 and under 60 with cover up to age 70.
• Premiums are guaranteed and start from £5 a month.
• Five clear yet broad definitions covering key reasons for claim – with an early cancer payment also available (which pays £5,000).
• Fairer Finance accredited terms and conditions.
Comment: The focus for Scottish Widows has been on simple to buy and understand life and CI cover for bank customers with mortgages. As such, it has to be tailored around the bank group’s advisers as well as their customers.
From a bank adviser’s point of view, the plan may well meet their requirements. But how well does it meet customer needs?
The issue with choosing not to include major traditional CI benefits is that the risk is effectively transferred to the customer. For example the customer may want £100K of cover, which could be invaluable if say they have cancer or a stroke or any one of what is still a long list of conditions. Not including say blindness means effectively saying to the customer ‘You’ve sensibly covered yourself for a big range of life changing medical conditions. Presumably you’re OK that if you become blind, you’ll fund that yourself?’
Analysis by CI Expert shows the plan does not include such industry staples such as blindness, cardiomyopathy, coma, deafness, lupus and third degree burns, nor terminal illness cover, guaranteed insurability and children’s cover. That’s quite a list to self-insure.
The counter argument is that CI is simply too complex and that means some people won’t buy cover at all, so they’re much better off with some cover rather than none at all. That’s true but, even if we accept that, the option to add back in those benefits later at minimal cost would make the argument even more powerful. This plan, along with other simplified plans in the market, does not offer that.
For advisers, all this is a bit academic – the plan can currently only be sold by bank advisers, and IFAs have their own life and CI plans available from Scottish Widows. That situation may well continue.
To end on a positive – the plan’s clear language, fast and simple underwriting and straightforward cover are all to be applauded. I also quite like the term ‘Body Cover’ – could that take over from critical illness (and previously dread disease) as the generic name for this type of cover?
Plus points: Simple to understand; Easy and fast buying process; Choice of life, CI or both; Useful early cancer payment benefit of £5K; Available through the banks’ branches; Body cover is arguably a better name than critical illness cover.
Not so plus points: Some major traditional CI conditions are not covered; Nor are some other benefits, such as guaranteed insurability options; Can’t be bought through IFAs; Not including some major critical illnesses, means the customer is effectively self-insuring some major life changing situations, such as becoming blind; Relatively low maximum benefit.
Rating (max 10): Overall: 7. Silver
Tags: CI; Scottish Widows
I Mark: No