Protection Watch...with Kevin Carr

Our protection detective gives his verdicts on five key developments in the industry this month.

1 Positive retrospection

As well as sounding like the latest Pet Shop Boys album, this is about Ageas Protect contacting existing critical illness customers to inform them that their terms and conditions have been improved, with some claimants even receiving increased payments.

Verdict: Promising lead

2 Children in need

According to a survey by charity CLIC Sargent, 66% of parents of child cancer sufferers were forced to borrow money to meet the costs associated with caring for their child.

Many insurers provide about £20,000 of children’s cover automatically these days with their critical illness cover plans and some, such as PruProtect, allow additional cover to be added on top.

Verdict: Promising lead

3 When good intentions turn bad

I have recently learned of a mortgage adviser who encourages clients to take life insurance and also asks them to meet with a solicitor to discuss trusts and wills.

My initial positivity was blunted, however, when I learned of the financial arrangement.

I am told the solicitor charges a set fee for both the will and the trust in the region of £2,000 plus VAT, which is added to the loan.

There is nothing wrong with asking a solicitor to arrange trusts and wills, but I do wonder if it is expensive and unethical when added to the loan.

Verdict: Back to the lab

4 Knowledge is power

It was recently reported that FSA chairman Adair Turner admitted regulators were ‘not clever enough’ to spot some of the problems in the financial services sector.

May I be so bold as to point them in the direction of personal finance editors and journalists who have understood and warned about many of the problems, specifically PPI, for many years if not decades. A quick flick through the weekly trade and national money pages might not do any harm.

Verdict: Back to the lab

5 Are ‘simple’ protection products a myth?

Rarely does a meeting go by without the subject of simplified products coming up and, in theory, I agree – products should be simple enough to understand. However, they should also be fair, of a certain quality, and competitively-priced. But is it possible to create good quality, simple protection plans that are also competitively priced?

The point that often gets overlooked is underwriting, especially by those who focus on savings and investments. Underwriting allows cover to be fairly priced but also adds a level of complexity. Without it we are left with auto-accept PPI and over-50s style plans. Yes, they are relatively simple, but they can also typically be poor value for money.

There is a trade off because underwriting brings complexity, but removing it adds cost. Any simple products need to provide ticks in four boxes: simple, quality, fairness and a competitive price.

But I am not yet convinced it is possible to achieve all four at the same time.

Verdict: Back to the lab

Kevin Carr is chief executive of The Protection Review