Simplification in protection products is topic that has had a lot of debate in recent times and to be fair it is something the industry has tried numerous times. The results however, often lead to reduced levels of cover or increased cost. So, is it true that you cannot achieve simplicity without compromising on the level of cover or cost? Lloyds Banking Group recently announced the launch of their ‘Plan and Protect’ products which they believe delivers a “straightforward product, transparent terms and conditions and a simple process, while providing value for money cover”. This week we take a look at the products to see if they have delivered on this promise.
First a caveat. The ‘Plan and Protect’ range have been designed for Halifax, Lloyds Bank and Bank of Scotland branch advisers, specifically to be recommended alongside a mortgage and as such is not available to the whole of market.
‘Plan and Protect’ includes ‘life only’, ‘body cover’ and ‘life and body cover’ options, with body cover being a new take on critical illness.
The new application journey asks seven health and lifestyle questions with usually three to four extra questions for each medical disclosure made. The system provides an instant decision on the vast majority of cases with manual underwriting only required if a very rare condition is disclosed.
The products themselves have been thoroughly tested with the bank’s customers through an extensive trial period. Instead of providing a long and complicated list of conditions that are covered – like critical illness plans – the body cover element of the product defines what is covered by focusing on the area of the body it affects.
Five detailed definitions are provided to highlight what is covered under a Cancer, Heart, Organs, Limbs and Brain & Neurological system headings. Within the terms and conditions, the five definitions are easily shown over two pages with a graphic, highlighting the simplicity compared to full critical illness plans that often require up to ten pages. Indeed, the full life and body cover terms and conditions is only twelve pages in its entirety.
Please note: the above does not depict the full definitions for each area of the body.
Clearly with such simple definitions, the body cover does not cover all conditions or features that a critical illness plan distributed by advisers will cover. It does include coverage for the lower grade and in situ cancers, however for these only £5,000 will be paid compared to typical critical illness policies that will pay upward of 25% to £25,000 of the sum assured if these are covered.
Compared to such products however, it actually compares quite favourably to the standard cost-effective products on the market for females.
This chart shows who is most likely to pay a claim based on our independent medical panels assessment of insurers definitions combined with age-banded incidence data. The age-banded incidence data along with the gender, age and term of the plan enables us to weight each condition based on how likely someone is to suffer from it. Therefore, those conditions that a consumer is more likely to suffer from have a far greater impact on the overall score than conditions that are rarer. This example is based on a female 35- year old taking out a 25-year policy.
For males it is not quite as comprehensive as the standard products in the market due to a lack of coverage for congestive heart failure and coronary angioplasty.
This chart shows who is most likely to pay a claim based on our independent medical panels assessment of insurers definitions combined with age-banded incidence data. The age-banded incidence data along with the gender, age and term of the plan enables us to weight each condition based on how likely someone is to suffer from it. Therefore, those conditions that a consumer is more likely to suffer from have a far greater impact on the overall score than conditions that are rarer. This example is based on a male 35-year old taking out a 25-year policy.
So based on comprehensiveness, our doctors believe that the Body Cover plan is actually pretty comparable to the standard critical illness policies available in the market. This is all the more impressive when you consider that the definitions are easily shown over two pages (including the graphic) within their terms and conditions. Indeed, the Life and Body Cover plan terms and conditions in their entirety are only 12 pages long. Compare this to critical illness terms and conditions – where most insurers struggle to fit just their CI definitions into 12 pages – and you understand how clever the concept is.
Children’s Cover, terminal illness and a whole host of added value benefits are not included as part of the package and the Body Cover is not as comprehensive as the majority of products advisers have access to, but this is not what they have been designed for. The products have been designed to ensure that every customer who takes a mortgage from a Lloyds Banking Group bank is recommended cover that they understand, will protect them against death and the vast majority of serious illnesses and can be put in force quickly. In my opinion the products do this extremely well. The fact that this has been done by only slightly compromising on comprehensiveness is all the more impressive.