Critical Illness, much cheaper DIY? New confused Lily here!

ACG

Are you selling on price or product and service?
If your selling on price then you are looking at the wrong job.

I will never be the cheapest, I will rarely be a million miles out but I offer much more. I know my products, I know they do what they say they will do and are not cheap versions parading as a full policy. I also know that if my clients have any questions in 6 months or 6 years time I can get them the answer. They do not need to call call centres and sit on hold. I also know if/when they make a claim they can call me and I will help them - potentially at a time they are quite stressed, ill or upset.

LilyJ89

Thanks for the comments guys. I get definitely where you're coming from, price is not the only factor! I think I was looking at things quite statistically i.e. is a relatively basic product like life cover worth 25%, not just in an "is advice worth it" way but whether the product itself justifies the price.

I suppose I'm getting at the fact that statistically the money the insurance companies have to pay out in comparison with the amount they take in premiums must be quite high especially when they can make an extra X % through certain channels. You guys would argue that despite this excess it is still definitely a need that needs meeting and is worth the cost despite the large edge the insurance company holds in most cases though?

Really appreciate the feedback, I am learning a lot!! Lily x

ACG

Im not a fan of analogies but Waitrose/Aldi, AO/currys, Selfridges/Primark, Mcdonalds/any decent restaurant.

There is no point worrying about other companies, there will always be someone cheaper, but there will always be someone more expensive. Your not offering a like for like product though, you are the difference. Also you are offering an advised service where as online is non advised, if its wrong its wrong and they have no recourse should it be wrong.

dunstonh

Advised cases have a higher level of consumer protection. That protection means higher liability to the adviser and that costs.

Levies alone come to around 6% of your turnover. Then add in regulatory costs (RMAR/Gabriel completion which really needs software nowadays that costs hundreds of pounds a month. Compliance support etc etc then you are losing a lot of your income to cover that.

Non-advised sales (comparison sites) have virtually no consumer protection as they are DIY bought. So, they dont have to factor that into their pricing. Some providers have said that DIY sales have more errors and are more likely to be completed with non disclosure than advised. Those people that do it wrong only realise when there is a claimable event or the insurer picks them for random underwriting checks. We have seen many examples on this site in the past where people have mixed up terminal illness and critical illness and thought they were the same thing. We correct them but what about those that dont post on the site and dont realise they have cut their cover without realising. How many DIY buyers will consider life of another as a method of setting up the policy or sorting out trusts. This is what the adviser brings to the party.

LilyJ89

Thanks guys - that makes sense in terms of the advisory costs and what they add.

I start to analyse things statistically at times and maybe take the emotion out of it so rather than what the adviser brings I was thinking more about the price and worth itself of the product once those costs are added on to the end consumer. Maybe this isn't a good way to look at it, feel free to point it out if this is the wrong starting point! For example:

Let's say 10 people take out a policy for £200,000 level term Life only. They all pay £36,000 in real terms when compound inflation has been taken in to account on the premiums etc. over the term of the policy; the insurance company full well knowing that the statistical likelihood is only 1 of those 10 people will die during the policy term. One person's family gets paid out £200,000 when the unlucky person dies but there has been an overall loss of £160,000 to those 10 consumers. It would be tougher overall for the unlucky family if all 10 people had simply saved the £36,000 but clearly better for 9 of them and all ten would have seen growth too!

In that sense, is it not a gamble that is always heavily hedged against you and thus is it worth it? I guess I'm starting to question the risk factor itself ....the emotion of "what if" may make it seem a good choice but isn't insurance a pretty inefficient way of parting with money? Of course it made a profit for the guy whose family was paid out £200K but you could say it was worth it for him even if he paid £150K in premiums!!

LilyJ89

Hi again all. I'm not sure if I scared you all off with the above ramble haha.

Does anyone have any stats on how likely a healthy 25 year old is to get a critical illness or to die before a certain age over a certain policy term for example?? I'm not sure if those kind of stats are readily available?

Really appreciate all the insights so far.

Lily x

ACG

Your previous post is a little pointless. You are discussing the risk of the insurer, thats not your concern. You are also assuming 1 in 10 will make a claim. When you think 1 in 2 or 1 in 3 (depending on where you read) people will be affected by cancer, its probably more likely that 1 in 10 will make a claim. Not all will fit the criteria for a payout but we could discuss that to the n'th degree as nobody knows what they will get and to what extent. Ultimately you are there to discuss the risks with the client and the costs. Yes they could be £36k out of pocket in premiums, personally I would rather that than see the £200k payout as it means either I or a relative has had a critical illness.

This is not perfect as it is for the canadian market but it will give you a good idea - http://www.insureright.ca/what-is-your-risk/

Also the average claim on income protection policies is 6-7 years (depending on insurer). Most companies pay 6-12 months sick pay, so if your clients are mr average and make a claim, what will they do for the other 4-5 years?

I think you are very much over complicating things. The conversation slimmed down is what would you do if your husband had a stroke now and could not return to work?
It will cost you £x per month to ensure that if that or something similar happened, you could afford to keep the roof over your head, heating on and food in your cupboards.

Claim statistics are great for when people say it will not happen to me or that insurers do not pay out (typically around 90% of claims on CI are paid out and 95% or more on life) but thats very high view. You are there to have that discussion with the family sat in front of you, forget everyone else.

LilyJ89

Hi ACG, thank you so much for your response.

I know what you mean that the insurance provider's profit isn't my concern - I totally agree. I just mean in terms of the efficiency for the client i.e. if 36K in premiums are paid for a potential 200K payout but there is only a 1 in 10 chance of dying in the policy term (I said life only and didn't specify a term length so just in hypothetical terms) then is it "worth it?" becomes the question I'm asking because you are paying a much higher rate than for the equivalent % likelihood of you dying for example. Hope I've made that more clear?

But I totally get what you're saying that I'm over complicating things most likely and I agree that the payout ratios are very good. Thank you for the Canadian calculator too. I can see some of that is based on quite old stats but the critical illness stuff seems pretty modern - food for thought indeed.

ACG

Some will say yes, others will say no.

But will the person saying no, put those premiums to one side, invest them and try to build it up? Probably not because there is always something more important - new TV, holiday etc. Also what happens if they were to get an illness or die after 6 months? Their £30 a month savings will not go far.

I always remember when at my old company we had a client who kept putting off CI cover. We spoke to him when doing his mortgage, he said at renewal. Reneal came 2 years later, he said come back in a month, we did and he said in another month. Anyway during the second month he had a heart attack. He was self employed and could not afford to take anything more than 2 weeks off work as the bills were coming in. I left the company as all of this was ongoing, he was trying to find ways to cash in his pension (at 50). I always think the stress and pressure he was under it would not surprise me if he had another. If he would have had £20k cover, he would have paid 2 premiums and been able to take maybe 10 months off work to recover.

Another example, my step brother who was 30-31 spent 12 months in a cancer hospital and had 2 bone marrow transplants. The first failed. As it happened his family were there and they were fine financially ok.

Im sure everyone has examples of where it is and is not needed but it is pretty much a flip of the coin as to whether we will get something or not and nobody knows.

As I said, its all about discussing the risks, options and costs. The client then makes their decision and thats that.

LilyJ89

Thank you for the response ACG, much appreciated. You're right that it is up to the discretion of the client to make such decisions. Also that it's impossible to tell what is "worth it" but simply what would meet someone's need in terms of risk I guess.

Lily x