Hi everyone, we are kicking off the New Year with a masterclass in advising in critical illness cover. Alan Knowles from Cura Financial Services is joining us to take us through some case studies of arranging critical illness cover for people with disclosures that can lead to exclusions and premium increases on critical illness cover.
The key takeaways:
- A case study of arranging critical illness cover for someone living with multiple sclerosis.
- A case study of arranging critical illness cover for someone having experienced a strong mental health history.
- A case study of helping a person claim on a critical illness cover when they had been told that they were not eligible too.
Next time we have the start of season 7 upon us and an episode format that I’m quite excited by. For the first time myself and Roy will become the interviewees, with Setul Mehta joining us as a guest host. This is the first time that we will be doing this and I’m looking forward to seeing how it works out, let us know what you think.
Remember, if you are listening to this as part of your work, you can claim a CPD certificate on our website, thanks to our sponsors Octo Members.
If you want to know more about how to arrange protection insurance, take a look at my 13 hour CPD Protection Insurance in Practice course here and 1 hour CPD Protection Competency Exam here.
Kathryn (00:06):
Hi everyone. We are on episode nine of season six of the Practical Protection Podcast, and this is the last episode of season six. Um, it’s a little bit later than I’d originally planned because I had that, uh, most horrendous call that was going around at the end of 2022 that seemed to last the month and just never seemed to go anywhere. Um, and so, but no matter what, better late than never, and we are going to have with us today, Alan Knowles from Cure Financial Services. Hi Alan.
Alan (00:31):
Hi, Kathryn.
Kathryn (00:33):
Today we’re, we’re taking you through a masterclass of advising on critical illness cover. This is the Practical Protection Podcast.
Kathryn (00:49):
So Alan, we’re actually recording this very close to it going out. It’s gonna be going out live in four days time. Usually we have a little bit more leeway, so we can’t really talk about, um, up to date events too much or anything. But, um, but yeah, we’re just coming out of Christmas. If anybody who doesn’t know me and Alan are actually husband and wife and we own Kiara Financial Services together. So we’re just coming out of Christmas. Lots of mayhem, children everywhere. My sister’s back with my nieces from Italy, so five children in the house, sometimes about 13 people in total for food and everything like that. It’s, um, it’s been a busy one, hasn’t it, Alan?
Alan (01:19):
Just a bit. Just a bit. And considering the kitchen’s mind demand, it’s been better. I’ve spent half, I think half the time in there.
Kathryn (01:26):
Yeah, <laugh>. I was gonna say, I think you probably have done kind of think though that was a bit of a way for you to escape as well. Sorry, said no one’s allowed in the kitchen. I’m just allowed in here.
Alan (01:33):
No comment.
Kathryn (01:34):
<laugh>, right. Let’s get straight into things. Okay. So Alan, you are coming to speak to us about three case studies and two of them are about arranging critical illness cover, and one of them is about some support that you gave to somebody who needed to make a critical illness cover claim, which was a bit of an unusual situation in what had happened, sir, but I’ll leave you to talk about all the, uh, the ins and outs of it all. So can you take us through your first case study please?
Alan (01:59):
Uh, yes, of course, I will do so. Uh, I guess in in True Cure style, this is, um, advice relating to somebody who’s got a preexisting medical condition. So, I mean, when it comes to critical illness advice, now, I mean, I, I remember when I started and you only had sort of seven or eight different providers offering covering, you only had one option for critical illness cover, whereas you look at a comparison now you’ve potentially got 50 different options within hands benefits and kids cover Bolton, all sorts of things. Well, I’m not gonna actually go into that side of things too much because when we’re talking about people with medical conditions, it, it kind of, a lot of the time you don’t have the luxury of choice over which provider you can use. You’re trying to find which provider is going to underwrite the most effectively.
Alan (02:44):
He’s actually gonna offer the cover and he’s probably gonna price it reasonably well. Cause if you start addings in to critical illness, which is already quite an expensive policy, it can get very, very expensive. So my, my first example I wanted to share with everyone was, um, a lady, a young lady who was diagnosed with multiple cirrhosis. So, um, the lady who’s my client is 34 years old, um, she came to me with her husband who is 35 years old, and she had been diagnosed with multiple cirrhosis around about nine years ago now, how it had come about, she’d had some double vision, she’d had some numbness, um, and, and these sort of events had led to her being diagnosed with ms. Now there’s a few different types of ms. Um, the one that she’s got is relapsing remitting, which is, is is probably the least serious of the ones that we would see.
Alan (03:35):
So you’ve also got things like primary progressive and secondary progressive, but you tend to see those in more severe cases or people who were older. So relapsing remittent is kind of, as it says, you, you have relapses with it. So you might go years without any symptoms and then have a relapse and, and have some symptoms. So she’s currently not medicated and actually she’s not had a relapse for seven years now. So since this is kind of initial thing happened nine years ago, she’s been really, really stable for a long time. Um, she works for the police, so she’s got good sick pair, which is really good because actually arranging income protection for someone with MS is, is very difficult. Um, and she’s got good life coming through work as well. Long story short, her and her hubby have have just got a new mortgage and, um, I came in basically to, to give my advice.
Alan (04:21):
So I recommended joint life and critical illness policy for them and separately did some income protection for, for, for MR as well. Now the, the reason why I specifically included this one is because most people think that you cannot get any form of critical illness cover if you have ms. Now it, it’s kind of strictly true because the critical illness cover it is a standard decline across the market with mainstream providers. But there is one provider on the market, I won’t name them, but probably a lot of people will guess who they are. They don’t offer critical illness cover, they offer serious illness cover, which is effectively the same thing, but definitions can be slightly different and it is more based on severity of a condition, which then pays out a percentage of the policy. So it could be a hundred percent payout, 50%, 25%, 12.5%, whatever, et cetera.
Alan (05:14):
So, um, what’s really positive here is that this client hadn’t had any symptoms now, hadn’t had any relapses for such a long time. So this insurance company are able to offer, um, well serious illness cover in these kind of good scenarios. So long story short, recommended 162,000 pounds worth of life insurance with 50% critical illness cover. So basically 81,000 on the critical illness cover. Now, we did this because of budgets because once you put into council loadings and everything, ultimately to me, to me the life insurance was the most important part and obviously the cheaper part, the critical illness is what really bumps up the cost. So joint policy, 162,000 on the life, 81,000 on the critical illness was covered 22 years decreasing cover with just shy of 68 pounds per month. And that included 50,000 pounds worth of children’s cover for each of her children as well.
Alan (06:08):
Now how that actually broke down is the life insurance got a small loading, so the loading was, was basically 55%. So it’s almost just like adding another half onto the life insurance premium. But bear in mind that her life insurance premium itself was only in the region of sort of seven or eight pounds. So the price increase was quite minimal. Um, the critical illness cover, actually the price didn’t go up, but what they did is they applied an exclusion on the policy for multiple cirrhosis as obviously you would expect anything to do with the central nervous system and anything to do with her eyes. So in other words, something like blindness wouldn’t pay out, but she’s still covered for cancer, she’s still covered for heart conditions, she’s still covered for so many conditions. So that was my first example. Um,
Kathryn (06:59):
I think that’s a really good example. And I was gonna say, there’s a couple of things in that that kind of stand out for me as well. So I think a lot of the time, you know, when people are faced with the idea of an exclusion, now whether or not that’s an advisor or a person, I think some advisors can think, well, if there’s an exclusion on it, the client’s just not going to want it. And I think, you know, especially with us, as you said, being Cura, this is something that we’re known for doing. I think we can both, you agree with me, Alan, that it can, it’s a complete mix. You know, you get an absolute mix of people’s responses to it. Some people ob I’ve seen nobody ever wants an exclusion, nobody ever wants a price increase, but some people can really understand that there would be an exclusion there.
Kathryn (07:37):
Um, I think some people would probably from what you said in obviously the idea with the blindness exclusion there, I think a lot of people would probably listen and think, what’s that? But obviously there was a very clear connection with MS and potentially the blindness developing at some stage, which is why there would be, um, an exclusion on there. But that would be something you need to really sensitively talk about to the clients. But I think with anything, when we’re talking about things like critical illness cover, and I think majority of times when it’s said to me or anybody else, people, the first thing they say is, if I’m diagnosed with cancer, if this happens, and, and it’s usually cancer that people mention and like you say there in terms of the exclusion, especially in this situation and, and in many other situations, it isn’t a cancer that’s excluded, it might be, obviously it is usually the condition that the person has already.
Kathryn (08:25):
Um, but one of the things I try and do, and I use this example when I’m explaining to people about the exclusions and, and some people understand it, not everybody does. Um, I always use the idea of Parkinson’s because, and I’ll say to people, because for me, you know, my dad has Parkinson’s, I’ve mentioned that plenty of times before. So I can say to people from a personal point of view, look, my dad has Parkinson’s, so just as an example, if I take Parkinson’s as an example here, if there was a policy that was gonna pay out 200,000 pounds for somebody being diagnosed with Parkinson’s, well my dad who has Parkinson’s, we wouldn’t expect him to be able to take out the policy and then the next day claim for 200,000 pounds. You know, that’s, it’s, it’s just a bit of an extreme example. But sometimes when we’re work in these situations, I think if somebody’s really sort of, they one’s sure as to how the insurance is working or they’re maybe thinking the insurance is working against them, that using those examples or maybe something you can use from your own life, um, just really sort of like helps to sort of like bring into that kind of reality of well actually yeah, that, that does make sense.
Kathryn (09:24):
You know, if it was, you know, I I should, you know, I can’t just the next day reclaim on this. Would you agree, Alan? That kind of works.
Alan (09:32):
Yeah, I think for me it’s managing expectations. So had I have spoken to these clients, done the applications, gone through everything and never once mentioned to them that there would be some exclusions on the policy and then I get an offer and I’ve got to then say to, oh, by the way, it’s come back, but I’m really sorry. It’s, it’s actually excluding the central nervous system in your eyes. Um, and and ms then she might have been, oh, right, well I wasn’t expecting that. Yeah. But if you tell somebody at the very start of the journey, then they know what they are expecting and that’s managing their expectations. So as soon as I find out that someone’s got MS or, or has a condition, and I know there’s gonna be an exclusion, just, it might be because I know, or it might be because I speak to the insurer first and they tell me that, look, there is a likely exclusion, I’ll tell the client about it at that point.
Alan (10:25):
And if they’re not happy with it, obviously, yes, I’ll try and talk to them around and talk to ’em about the benefits and the fact that 70 plus percent claims or 60% plus claims are for cancer anywhere. So actually you, you know, you, you’re excluding a relatively small part of the policy in the grand scheme of things, then most people will be absolutely fine with it. And if they’re not fine with it, they’re not okay with it, then we don’t progress to an application. We don’t take any more time on it. Um, you don’t, just don’t go any further. You certainly don’t months potentially going through underwriting for the case. So tell them upfront, if they’re in agreement, 99% of people completely understand, um, and completely get it as long as they’re explained it, you know, in in, in the right way with it. There will always be that one in a hundred who say, Nope, nope, not interested, not happy. And that’s fine because they’re unfortunately, they’re not going to find that they’re not going to be able to find that cover without an exclusion on this.
Kathryn (11:16):
No, absolutely. And um, and I think what you’re saying there is really important along the lines of, you know, if you are faced as an advisor with a condition, you might be somebody like Alan who’s had lots of experience in something and I think it’s important to say recent experience as well because underwriters and underwriting philosophies do change over time. We’ve had, uh, just thrown that we’ve had some really big change in terms of HIV and there is now, you know, potentially options for critical illness scope of people with living with H I V now, and that was, that’s very, very new. So it’s always a case of never, never assume in many ways, but obviously if you’re doing something quite regularly like you are, especially Alan, and you know what the market is going to, then you can either have the confidence to say it straight away and, and ultimately as well, this is all about, like Alan says, managing expectations.
Kathryn (12:01):
You’re not giving somebody a false hope and that’s gonna potentially feel, if you do that, then obviously you are gonna have potentially some negativity towards yourself if you’ve sort of said, oh yeah, we’ll do this, it’ll all be fine and then not mentioned anything, you know, you are gonna, especially in a situ with multiple sclerosis, you are gonna be going for GP reports, so it is gonna be months down the line. You don’t want somebody investing their time in this if ultimately what you can give them is not what they’re looking at from the start. So it’s, it is much better in the long run to be as, as open as possible. And that thing that you’re saying, Alan, there, speak to the insurers, do your research, don’t promise anything in the first meeting. You know, go away, do all the research, find out if need be.
Kathryn (12:40):
If you’re not sure on what you’re doing first select someone says to you multiple sclerosis and you’ve never come across it before, just say, you know, along the lines of, well, I’ll just need to speak to some insurers. It might be that I have a few more questions once I have done and then go speak to an underwriter and just say, right, what is it that I need to know? And they’ll tell you what they need from you to be able to give you an indication and then go back to your client, ask the extra questions, go back to the insurer, tell them the answers and see what you get from there. And um, and then obviously everybody, it’s doing more work in the very beginning to make sure that if you months of working, that it doesn’t end up being a situation where the client isn’t happy with the outcome that you’ve been able to give them. So obviously, I mean, that just really shows the importance of speaking to a specialist advisor, but what’s your second case study?
Alan (13:28):
Um, so just a, a slight warning on this one, just that this one is mental health related. Um, I, I won’t go too much into detail with this, but obviously I know mentions of certain things can be triggering for people. So, um, skip forward five minutes if, if obviously you don’t wanna want to hear this one at all. Um, so my, my second example is for a, um, a 36 year old female, um, actually similar profile to the last one, uh, in terms of urgent and gender, um, civil servant, again, she’s got good sick pay and good death in service. Um, she is getting a mortgage with her partner. Um, partner’s already been sorted out via her mortgage broker, so basically her mortgage broker couldn’t cover her. So referred her on to me to say, you know, Alan can, can you arrange some wife and critical illness cover for it?
Alan (14:16):
Um, in addition to, um, getting a new mortgage, she’s also expecting her first child. So physically, um, her health is really good. Um, actually no disclosures of of any material nature on the physical side. Um, but on the mental health side, um, very sadly two years ago, um, her mother actually took her own life and obviously something it’s, it’s, you know, horrific for anybody to, to go through that, um, you know, for anybody close to them. And, and it led to the client understandably getting very low, um, being in quite a bad place of herself. Um, and her way of coping with it was through self-harm. So she was basically cutting herself and, and and hurting herself. Um, and this went on for, for, for, for, for a bit of time. Um, obviously she’s now in and I’m pleased to say she’s in a much better place now.
Alan (15:08):
She’s stable, works good, she’s, um, expecting a child, obviously getting a new mortgage and everything. So things have been very, very positive for her. But we are still relatively recent in the eyes of an insurance company. So usually insurers will treat things within the last five years. Obviously the longer that has gone past with something like this the better from an insurer’s eyes, but with this, we’re talking between 12 and 24 months, so it’s not that long in the grand scheme of things. Now the other point with this is you might think, well actually self-harm is, is not as bad as says somebody trying to take their own life. And, and I would completely agree, however, most insurance companies do actually treat self-harm and actual attempts as almost the same. So they get loaded, the price goes up by the same amount, they bundle those questions together.
Alan (16:01):
Um, I go back to my life insurance masterclass, I know not everyone would’ve necessarily, um, heard that one, but we talked about per mill loadings at that point. So per mill loading is where a life insurance premium goes up because of the summer assured. So if you’ve got a hundred thousand pounds worth of cover for example, and it’s 10 per mil, then it’s 10 lots o of a hundred basically. So it’s 10 pound for every thousand pounds worth of cover, it can get very, very expensive. So the problem is with a per mill load in a price could easily go from 20 pounds a month to 200 pounds a month. Um, just very, very simply where you don’t tend to see that with your standard percentage loadings instead. Now the reason why I’ve mentioned that is because it actually directly affected the advice that I gave to this client as well.
Alan (16:45):
So for for, for this client, we had quite a tight budget actually obviously a lot going on, new mortgage and everything like that. Um, wanting life and critical illness cover her mortgage was 463,000. So it’s a decent size mortgage. So you could imagine doing life and critical illness cover for that full mortgage, even without taking into account the medical conditions would have been pretty expensive. So what we actually did with this one is we broke it down into the life and critical illness into their individual elements. So we prioritized the life insurance first because most likely we could get this within her budget. So 463,000 pounds worth of life insurance decreased in term over 31 years. We actually got this for 35 pounds and 40 pounds per month. Now this did not have a per mill loading on it. The reason why it didn’t have a per mill loading, um, we actually had a a hundred percent loading instead.
Alan (17:38):
So basically the premium doubled, so it should have been what, 17 pound 50 a month, 17 pound 70, it doubled up to 35 pound 40. The reason we were able to do this rather than seeing it go into the hundreds is because we can apply a lifelong exclusion on self-inflicted injury. So basically rather than just having an exclusion for the first 12 months on the life insurance, it excludes suicide now throughout the entire policy and it makes it much more affordable for her. So we did the life insurance there and then what we did is we said, what remaining budget do we have? What can we do with the critical illness cover? Now my original suggestion was that we would look at a level policy for 25 or 50,000 pounds just to give her some cover on the critical illness cover and I’d recommended that over a decent term as well.
Alan (18:29):
Unfortunately the prices were coming back higher. Um, the life insurance premium was a little bit more than I’d um, sort of anticipated. So go back to Catherine’s comment and my comment earlier about managing expectations. I thought the premium was gonna be about 25 pounds a month, 27 pounds a month. It came back at 35 for the life insurance. So actually it did come back higher than what I expected. My research maybe wasn’t quite as as good as what it should have been on that one, but ultimately she was still happy with it. But what it did was affect the budget that I have left for the critical illness cover. So the critical illness cover, we actually ended up doing 25,000 pounds. We only did it over a five year term in the end. Now I would have wanted to have seen her with 25 years, 30 years, something much longer term. Her view was on those premiums, she was gonna walk away with nothing. So the, the kind of interim for that was let’s do something to try and get you past the period of where this five years is. It is causing you a problem.
Kathryn (19:31):
When you say that, Alan, just to be very clear, so that five years what you’re meaning is put something in place for now, you know it’s better to have something in place for now that’s affordable for now that’s gonna provide the protection rather than something that’s not affordable for very, very long, which just means you’ll walk away without any critical illness cover. But when you talk about that five years, what you are meaning is the five year timeframe that you’re being indicated by underwriters to say in five years time we should be able to look at this with much more favorable underwriting.
Alan (20:02):
Correct? Yeah, exactly that. Now there is a big risk involved with this as well that I had to highlight to her, which is if her health changes within the next five years, whilst we are waiting for that, she will not be able to or she may not be able to then change that policy or the premiums may be loaded so increased more. So this is not an ideal solution, but ultimately it gets her a little bit of cover at the moment. And as you said, she was going to walk away with nothing if it wasn’t for that. Of course the other option would’ve been reduce the cover down even further and keep the longer term. But there is an element of what the client wants in this as well. We can advise as much as we can on these, but ultimately the client does have a say as well in this.
Alan (20:44):
So I think the last thing I would just point out on the critical illness side with this is this is one of the very, very few times where I’ve ever actually done a standalone critical illness policy. So that critical illness benefit of 25,000 has no life insurance built into it at all. Now the reason that I did that is because if I’d have included it and done it as life and critical illness cover, okay the standard premium would’ve only gone up by pennies, but the life insurance would’ve been subjected to that original per mill learning that I mentioned. So it would’ve caused the premium to go up substantially compared to it. So it actually is one of the very, very few times where I think it is beneficial to have a critical illness only policy. And there’s a lot of talk at the moment going on about whether we should even have standalone critical illness cover, whether it’s a waste time because people think, well it’s only pennies more to have the life insurance included. And that’s absolutely right unless you hit one of these slightly unusual cases where the life insurance premium increase or loading is much higher than the critical illness loading.
Kathryn (21:54):
Yeah, absolutely. And I was gonna say in terms of the reason why say cure and the way that you are l as to why we, we really avoid standard on critical illness cover, I’ve mentioned it before, is that with critical illness cover you do get a survivability clause if it is standalone cover. So that would mean that if somebody is diagnosed with a critical illness, let’s say they have a heart attack and they pass away within anywhere between 14 and 30 days depending upon the insurer’s contract, then the insurer will not pay out the claim because it is standalone critical illness cover. By combining the life and critical illness cover you automatically, if that were to happen in that scenario, say somebody has a heart attack four days later they pass away instead of the show and not paying out a critical illness claim, yes, they won’t pay out the critical illness claim, but it will transfer automatically to a death claim.
Kathryn (22:43):
And that is why we would usually for the fact, like Alan says, it’s usually barely any difference to include life onto the critical illness policy and for some insurers it costs no difference whatsoever, um, to include it in and that would be why we would genuinely recommend that. But as you say, Alan, very much on this case, it was really worth having the standalone critical illness cover because of the fact that, you know, clearly it would’ve just been this person wouldn’t have been able to get critical illness cover at all on the standard market if it had been like a forced life and critical illness thing together. Now that always comes down to what we’ve just said there it comes down to your compliance people as to what they say is okay as to what they say isn’t okay. But, um, it is something that I do just like to reiterate because there are a lot of times that we’ll come across situations where we’re may be reviewing people’s cover, they’ve been done standalone critical illness cover and unfortunately the survivability clause hasn’t been discussed or you know, whether or not that’s the original advisor’s just not aware of it.
Kathryn (23:42):
Um, or I don’t know, maybe person has just forgotten that it was there, but it’s just really important to make sure that you understand that because it is a risk, it is something you need to make aware to your clients. It isn’t something that I would personally, and I think a lot of advisors, I don’t think any of us would want to go up against a false complaint because of the fact that we’ve done standalone kick and not explained those kinds of risks. Um, because there are some very specific situations in the critical illness contract where that survivability clause could be enacted. And Alan, your final case study now, which is a a different one isn’t it? It’s you’re going on a different kind of route for us all, which is, it’s gonna be interesting.
Alan (24:25):
I thought I would mix it up here rather than just talking about three clients that I’ve arranged cover for. I thought I’d talk about a client that I didn’t arrange cover for. Um, so this is a lady who was actually referred to me from an I affair earlier on this year. Um, and the basically the plan was, um, we were going to look at some life and critical illness cover for, for this lady. Again, this was a lady in her thirties, um, and very sadly she’d been diagnosed two years ago with stage three bowel cancer. Uh, she had been fully treated for it, she was in remission. But obviously stage three, um, generally there are four stages of cancer with all usually being terminal. So stage three is, is quite high and it usually means that the cancer spread in somewhere probably to the, to the lymph nodes.
Alan (25:10):
Obviously not an exact sign for every type of cancer, but, but in this one it had, it had spread to her lymph nodes. So obviously the i a was really struggling, they couldn’t arrange any life insurance, they couldn’t arrange any critical illness cover. So they said to us, is there anything that you could do? Now there, there would’ve been some things we could have done. It wouldn’t have been perfect. It would’ve probably come with very, very high premiums for life insurance or with some exclusions on, on both the life insurance and the critical illness. Probably to an extent where I actually wouldn’t have even recommended any critical illness for her. Um, but we could have done some life insurance. But anyway, long story shot. When I was speaking to the client and I was doing my fact fine with her, I found out that she actually actually had got some life and critical illness covering place already.
Alan (25:53):
Um, and she’d had it for many years. Now this was covering an old mortgage, but obviously it wasn’t covering what she had at the moment. So we got talking about this and I said, well, did you make a claim on this policy? And um, she said, well, I, I tried and I spoke to some people, but they basically, I got told it was the wrong type of cancer, um, or that it, you know, it just, it wasn’t gonna pay out or it, you know, it wasn’t severe enough. Um, and I was thinking really, so I, I actually asked her to go back to a doctor, to her oncologist and confirm the, I thought something doesn’t sound right. You know, usually you would expect cancer not to pay out one if there was an exclusion on the policy or two if it was in situ situ or, or sort of premalignant borderline malignancy.
Alan (26:40):
And there are a couple of exclusions around things like skin cancer and pulmonary thyroid cancer stage one, but a stage three bowel cancer, you would expect to, to pay out any day of the week. So automatically spidey sensor is going off. Something just doesn’t sound right, but I, I’m thinking there’s an exclusion on the policy. I thought, I bet there’s a bowel cancer exclusion on the policy. There must be something Charla. So, um, oncologist confirmed the staging to me. Um, he said it was a t3, uh, t3, a T3 B, um, basically, which meant it was a stage three and it was N one, which meant it had spread to the lymph nodes. So I’m thinking right, this should have been, this should have been a clamp, you know, this, this is quite an aggressive cancer obviously, um, this should have paired out. There must be an exclusion on the policy.
Alan (27:25):
So I got the client to sign a transfer of authority form. Um, they transferred the policy over to our agency to us and I got speaking to the insurance company and um, I said, you know, has she ever tried to make a claim? And they said, absolutely not. There’s no record of a claim anywhere on our, on our system. So the only person that we can think has, has basically possibly said, look, it’s not serious enough for the wrong type is the original advisor. That’s, that’s kind of what the client thinks, which obviously is, is really, really bad if, if, if that is the case. Um, should we just clarify
Kathryn (27:58):
That wasn’t the introducing iffa?
Alan (28:00):
Yes, absolutely. That was not the iffa who referred it to us. Um, and um, anyway, I spoke to, to the insurance guy near, um, but I spoke to the insurance company and they said, no, there’s never been a claim date. So then I was like, can you send me a copy of the policy? Is there any exclusions? No, no exclusions applied. Um, there was nothing, nothing at all. So, um, spoke to the insurance company, said, would you accept a retrospective claim for something that happened two years ago? And the insurance company said yes, absolutely. Um, so we put in a claim and we processed it all for the client. We worked alongside her with it, got everything back for the insurance company. The insurance company largely was, was brilliant with it, you know, they were really good. It did tech a little bit, I think it took about six to eight weeks to go through.
Alan (28:47):
Um, but given she’d been waiting two years for, for this I guess, uh, another couple of months weren’t gonna gonna sort of harm anything and I’m really pleased to say that the insurance company paid out. Um, you know, they said have they have got this two years ago they would’ve paid it out and it’s only fair that they paid it out now. So she ended up claiming and getting 127,000 pounds paid out on that critical illness policy and she didn’t pay off a mortgage with it. She’s put it into an investment and in, in some into the bank and she’s basically created her own life insurance policy with it. So she doesn’t need any more cover. Now she’s, she’s not gonna pay for any more at the moment. She’s basically saying, I’ve got this money. If something really hap, if something bad, something happens and goes wrong, I’ve got, there’s, there’s cash there, there’s money there now that I can use to pay off a, you know, the majority of the mortgage.
Alan (29:35):
Um, so obviously she’s absolutely over the moon with it. Um, point out from our perspective, we didn’t make a penny, you know, this was effectively a free service that we offered. Um, and we did it because it was the right thing to do because we believe in this because, you know, this is what these policies are there to do. We’re all in this together to try and build trust in our industry and to, to, you know, these policies are meant to pay out when something happened. She should have had this money two years ago. So the fact that we’ve helped redin, you know, I’m really, really happy with that. Um, and I guess the, the kind of the moral of the story with this one is, you know, one good fact finding, um, and two, listen to your spidey sentence. You know, trust, trust your gut and if something doesn’t seem right, it might not be, and there’s no harm.
Alan (30:22):
Don’t make false, false promises. You know, I never, I never promised her that I would have this paired out, but I said, look, what, what is the harm in us trying? What, what could, you know, if they turn around and say we’re not gonna pay the claim for whatever reason, then she’s in no different position than where she was now. Um, so it was worth trying and obviously the outcome was incredible. So, you know, it’s, it’s looking after your client. And anyway, I could keep wrapping on with that. Hopefully that’s a, a slightly different take for you.
Kathryn (30:49):
No, I think that’s a really important one and I think, you know, cuz people might be thinking, wow, that’s such a, such a random find. But I have to say, I mean I know obviously we don’t <laugh> we don’t speak to every single person in the UK and certainly won’t be speaking to huge percentages of the, the clients in the protection industry, but I think people might be surprised at how often, you know, as a company we’re doing that pro bono work where we are helping people who are being brought to us who are basically the claim either number of different reasons. It could be that the claim’s not being paid and people just need a bit more of a specialist eye on it in terms of us looking at the medical condition and saying, actually this should have been paid. You know, why isn’t it being paid?
Kathryn (31:28):
What’s missing? Is there some kind of medical evidence somewhere that’s not being put through to the insurer? You know, as someone’s been like this situation, someone’s been told the wrong thing. Um, and then also from people who, you know, obviously was supporting, you know, I, I know myself, I was speaking to somebody about a month ago and you know, we’d arranged the cover for them and we spoke and there’d been a slight change in circumstances and I was just, again, same as you and I was just like, right, I was like, I said, I can’t promise anything, but let me just go back and look at the original document and I did. And there’s gonna be, um, you know, quite a significant claim payout and that’s happening more and more and it’s happening more and more as well where exactly the situation that you’ve mentioned down where we’re having IHAs introduce clients to us and we’re going back through previous things and there’s clearly lots of times that people aren’t making claims when they absolutely can do.
Kathryn (32:15):
And I think what’s important here is to know that as an advisor, that is our duty to do this and to see this, people are taking up these policies and people are smart, they know what they’re taking out, but they don’t know these things inside and out like we do. And they’re gonna forget some of these things in there or they might be told something wrong at some point. And especially now as well, looking at things like consumer duty, if somebody an can say that they are definitely doing everything, they’re making note of the existing insurances that are in place, they’re making sure and stuff that they’re tallying up the dates between, you know, potentially a diagnosis of something and if a policy is being active and x, y, z you know, there are lots and lots of things that we need to do to make sure that we are treating customers fairly and you know, you know, luckily this lady came to you, Alan, and you were able to spot this and she’s now got that 127,000 pound payout and she feels obviously really financially secure now.
Alan (33:09):
And, and just to say, I mean this can happen with our own clients as well. So I had one of my own clients who I did a review with a couple of years ago, and as I was talking to her and going through some of the medical things, asking about changes, she said, I was diagnosed with rheumatoid arthritis last year and you know, I, I didn’t say anything on the call, but in back of my mind I’m thinking I I did you a comprehensive critical illness policy last time. I wonder if that was covered because some policies do cover rheumatoid arthritis. Um, anyway, when I got off the phone with her, I went and checked and found out she could make claim on a policy and she did. And it paired out. Yes. Um, and she was still able to get more cover, a new cover, um, because actually it wasn’t in a sense that severe as a service cancer case.
Alan (33:49):
So it can happen with your old ones. I think sometimes people, you know, they, they take out the critical illness, they buy it and as much as we explain it and and say what it is, this is our job, this is what we do all the time, customers don’t remember that. Do I remember what features are on my car insurance and my own insurance? No, you know, I I I forget about them, I might read about them at the time, but I will forget as time goes on. So it is really important for us. It, it’s why I think reviewing clients and going back and talking to people every year or every two years is so important.
Kathryn (34:17):
Absolutely. Completely agree. And now Alan, I’m gonna put you on the spot a little bit and ask you <laugh>, sorry for anybody who can hear our dog in the background. There was just a noise outside. So he’s, he’s defending our honor of our house. Um, he’s a tiny little thing, he’s worst guard dog ever, but he’s noisy sir. Hopefully he’ll may be scares someone off at some point. Anyway, so Alan, I’m going to put you on the spot and one of the things that we’ve always had in this industry, obviously I joined the industry in 2010, so you know, a, a good while ago, I know you joined it in 2005 I think it was, is this thing of critical illness cover versus income protection. Now we’ve done a masterclass in life together masterclass in income protection. Now this masterclass in critical illness cover and we’ve always had this do do kick or do you do ip, obviously ideal world scenario, you do all of it, but a lot of the time for budget it can become one or the other. Now, given, given not just our client base, but obviously our client base does come into it as well, especially from when we’re looking at it and we’re bound to be influenced by that. But what are your thoughts on this kick versus IP divide?
Alan (35:26):
Uh, cheers, <laugh>, is that right? So I mean, at the end of the day, you’re absolutely right, it should, these policies are complimentary, you should have all three. We should build a portfolio and package, which has everything. But even if you are doing that and you do manage to get a little bit of everything in, you still gotta determine what’s the importance, what’s the levels that we should be doing and what do I prioritize over something else. So what’s quite interesting I think for me is the critical illness sales in the industry are still more than double the amount of income protection might be three times the amount, but you know, it, it it’s substantially more critical illness cover is offered than income protection. Now is that because income protection is more complicated? Is it because people have got good sick pay through work and group schemes so they don’t need income protection or people perceive income protection to be hard to write?
Alan (36:17):
Or is it just because actually life and critical illness sits quite nicely with a mortgage, you know, a nice decrease in term life and CI policy to run alongside a mortgage putting be a combination of all of the above. But if you, if if you actually look at almost the, the hierarchy of needs and you look at what is the most likely event to happen to somebody, actually the first product we should always recommend to anybody is income protection because it’s the most likely to be needed. We are most likely to be unable to do our own occupation, do our job for a period of time than we are to say have a, a serious claimable critical illness or to be able or, or, or to pass away. The next on the list is critical illness cover because we’re more likely, you know, one and two others will get cancer at some point in our lifetime.
Alan (37:05):
Um, but actually the risk of of say dying below the age of 65 70 is, is a lot smaller than us say having cancer or, or having heart attack for example and surviving it. But so I guess in in, in reality kind of your order of most likely event is income protection, critical illness and then life insurance at the bottom. Personally for me, I would say the hierarchy of needs should actually be income protection should be absolute priority because almost everybody need income protection. If you’re working, you probably need income protection. Then I would say life insurance because if you have dependence obviously and you have a need for life insurance because it’s cost effective because it has a huge impact. Um, the last one I would say is critical illness. I actually think that critical illness cover is, it is a wrong way to look at it but it is almost the luxury product in a sense.
Alan (38:01):
It’s the one that fill in a bit of a gap, gives out a helping hand if you need it and it’s got lots of benefits in there, obviously like children’s cover and there are times that CI will pay when income protection won’t. But for me I think income protection is the one product that everybody who is working should have. But interestingly is the lease sold. So income protection priority critical illness to help fill in a gap. That being said, there are reasons why you would recommend critical illness over income protection. So if you’ve got a house person for example, or somebody who’s, who’s supporting the children personally, I don’t think the income protection policies that support house people are particularly good. Um, so I would prefer to see them say with a critical illness policy because if that then pays out, a lump sum partner might take time off work, it helps fund that helps fund recovery, all sorts of things like that.
Alan (38:53):
There are also interesting areas with income protection and critical illness where the underwriting is very, very different. So for example, somebody who has had cancer, um, in my experience or is a diabetic is much more likely to get an income protection policy and have it accepted than they are a critical illness cover. Whereas if you’ve flipped out on its head critical illness cover is much more likely to be accepted for somebody with a severe, uh, muscular skeletal um, condition. Um, not specifically muscular skeletal, but I’m looking at you Kathryn with this, with hypermobility syndrome income protection virtually unavailable for somebody living with hypermobility syndrome. Unless you do a group policy or you manage to just squeeze through one of the, the insurers who will will accept it. Critical illness cover actually hypermobility syndrome. Now probably thanks to a lot of the work you did when we first started as well, actually a lot of insurance companies will accept critical illness cover. So again, it’s about understanding the condition and understanding the policies. So the two can compliment absolutely, but then the underwriting can come into it as well. That’s a really long-winded gone off on a tangent answer, but does it help
Kathryn (40:04):
<laugh>? I think it really does help and I think it’s probably safe to, to not enter a debate about me being able to get income protection in the insurance markets. You know, so I’ve never had a day off for any of my health conditions, but we shall just leave that there shall we? Yeah. <laugh> <laugh> as
Alan (40:19):
We need, we need a campaign. Ensure Catherine, let’s
Kathryn (40:21):
Ensure c Ensure Catherine. Absolutely. Oh, can you imagine if an insurer actually managed to give me income protection? It would. Um, I think that would definitely be a headline or somewhere. So, um, thank you everybody for listening and as always, thank you Alan for your insights and giving us this one down with this masterclass. Next time I’m gonna be back with season seven of the podcast and me and we McLaughlin are gonna be the interviewees for a change. And we have settle meta joining us as a guest host. It’s the first time we’re gonna be doing that and I’m quite excited actually about how it’s going to turn out. If you’d like a reminder of the next episode, please drop me message on social media or visit our website, practical hyphen protection dot code uk. And don’t forget that if you’ve listened to this as part of your work, you can claim a CPD certificate on the website too. Thanks to our sponsors, the Okta members. Thank you Alan.
Alan (41:09):
Thanks Kathryn. Bye.
Transcript Disclaimer:
Episodes of the Practical Protection Podcast include a transcript of the episode’s audio. The text is the output of AI based transcribing from an audio recording. Although the transcription is largely accurate, in some cases it is incomplete or inaccurate due to inaudible passages or transcription errors and should not be treated as an authoritative record.
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