A couple of errors in my IP advice

Having finally woken up to the fact I live in a single-income household with one adult, one junior dependent and a third on the way it has become necessary to cast around for some income protection.

This oft-forgotten land of security is more appealing than term or whole of life assurance given the fact I will probably be working until I drop - thanks to pensions reform - during which time my employer(s) are increasingly likely to offer at least some death-in-service cover as part of an overall package to attract my increasingly buff skillset.

Having MPPI in place already means I am not going to have to withstand the whole shock of throwing away a rather large percentage of my monthly net income on the off-chance someone takes a disliking to my writing and sends me a rather dodgy Jiffy bag.

I am, naturally, not enough of a diva to also insure my hands and fingers separately, in the manner of Pavarotti and his voice, as tools of my trade – I live under the assumption computers will in 10 years' time be sophisticated enough to turn impulses from my synapses read by nano-machines inhaled in powder form into words of wisdom on the state of personal or other finances.

But, I am diva enough to want to ensure I get a good deal on any IP policies quoted. Hence the use of a specialist protection adviser. The firm I opted for is Lifesearch.

My initial impression was good: inputting a few answers to questions as part of the company’s arm’s length pre-fact find produced the desired call-back for further questions.

An email followed rapidly. However, this is where the system all began to unravel.

While the three quotes identified I am, seemingly, in a category 2 risk group – presumably because of my propensity to leave the desk, walk the mean streets of London, and do lunches (more of that later) - and I was looking for protection until age 65, there were a few other mistakes.

Firstly, once the three quotes were out of the way, the bottom of the email suggested I was in fact looking for cover for the ‘next 65 years’ rather than until age 65.

Also, although reference was made to an attached 'KFI' document, it was not there.

Finally, in summing up my needs, the email contained the following: "The main purpose of the cover is to provide an income in the event of being unable to work due to ill health, to cover your Salary."

"The main aims are to provide cover for £.... for the next 65 years and to provide single-life cover".

That use of ‘single life cover’ raised alarm bells over just what sort of structure there was to the recommended product, as I had not asked for any life to be added, just a pure PI offering.

A short email on my part to seek clarification on these points, pushing to get another quote for a slightly lower sum of £1,200, plus throwing in a reference to ADLs to see if the ‘adviser’ was in fact awake produced the following response:

• being given a quote based on an 'Own Occupation' definition - "This is the best definition to have on any income protection policy,as if you can not do your own job if will pay the benefit."

• a properly attached 'KFI' (more of that below)

• “In terms of the terminating age it will payable until the age of 65, there was a problem with the template we use for income protection quotes and it will be purely income protection and not any life cover, sorry for the confusion”

• a quote working out at approximately 5.6% per £100, payable after four weeks.

Now, having got back on track, and having read the generic 'KFI' from the relevant provider, it does indeed look like the product for me and my current needs, although with enough flexibility to deal with future changes – presumably greater nominal annual income, and in my case possibly moving to one of the countries where any possible benefits payments would not be downgraded.

What the KFI does not do, however, is provide the sort of information which would be contained in an IDD.

Interestingly, a chat with someone in the industry elicited the response under current ICOB regulations this would not generally be expected until I actually moved to sign an IP contract.

However, doubly interestingly, this same person also suggested this is something they have brought up with the FSA and others in the industry to have changed, as it is incongruent with adviser processes generally expected regarding other types of products.

The bottom line is consumers currently might be given IDDs outlining costs and adviser remuneration policy at different stages, depending on what type of product they might be looking for or receiving advice on, potentially creating confusion as to just how the regulatory system actually works in their best interests.

The provider 'key facts' document which I received states it allows for all charges, including commission payments, to be contained in the premium payments being made.

But, it does not provide me in writing with facts about the intermediary service being offered, whether Lifesearch will indeed by remunerated by commission, and if so, what proportion of the overall recommended product premium their cut tallies.

The factors above lead to considerations of consumer trust in financial services, and the massive lack of understanding of how products work and how to get access to knowledge if it is lacking.

It is said a little bit of knowledge can be more dangerous than none at all, but how does the example above square up against a basic comparison site internet search, which throws up an initial headline price of 2.5% per £100 on the same £1,200 required and a 30-day wait.

Of course, having been involved in the industry for the better part of a decade now, I believe I have the capability to sift products and quotes beyond headline prices. It is unlikely the majority of Britons do, however, which means it is ever so important services such as Lifesearch - which regularly shouts consumers should get appropriate financial advice - get their systems in perfect running order.

Arguably, the FSA should also do its part to upgrade the Moneymadeclear website with a tool to enable those looking for IP to get a rough idea whether the quotes they are getting are in line with market averages. The basic information and tips on IP are fair, but given the FSA’s own rampage against PPI at the moment, it would do to ensure consumers are not confused by the acronyms.

Perhaps it should also be a requirement for all providers of online IP quotes or services to have on their websites a link directly to the Moneymadeclear site. That way they can further boost their TCF credentials, and possibly claw back some of their operating costs associated with cobbling together a mass of consumer-facing text.

In terms of my own next move, I shall definitely be asking for re-clarification on my risk status: it turns out predominantly desk-based journalists who pop out for press conferences or even cups of coffee at Caffe Nero should most probably be in the category 1 group, not category 2 alongside reporters doing high mileages or a large number of international flights annually, or even City-based couriers.

This article is published following a genuine consumer experience with a protection adviser while the photo illustrated is not that of the author. If you would like to comment on this blog or would like to speak to the editor about a similar subject, either telephone Julie Henderson on 020 7968 4571 or email julie.henderson@incisivemedia.com or post your thoughts through the 'Have Your Say' box at the top-right of the page.