WHY MORTGAGE CLIENTS NEED INCOME PROTECTION
SHELLEY READ SENIOR PROTECTION DEVELOPMENT AND TECHNICAL MANAGER
WHY MORTGAGE CLIENTS NEED IP AGENDA • Underwriting during Pandemic • State of the income protection nation • Dreaded Call • Illustrating the chance of a protection claim • 5 simple steps to sell income protection • Designing an IP solution on a tight budget
WHY MORTGAGE CLIENTS NEED IP LEARNING OBJECTIVES At the end of this webinar you will: • Have an awareness regarding what happens when people go off work sick and why losing income can cause extra problems • Understand the latest levels of state benefit that can be claimed in the event of sickness or incapacity for 2020/2021 • Be able to illustrate protection risks for your clients based on their own individual circumstances • Follow a simple 5 step process to help your clients understand their protection risks and their priorities • Understand how Royal London can help you create a tailored income Protection solution which fits within an affordable budget
UNDERWRITING DURING PANDEMIC
WHY MORTGAGE CLIENTS NEED IP UNDERWRITING • Coronavirus application questions • Medical evidence • Non medical limits • Temporary underwriting limits for higher risk customers • NHS workers • Claims • Keeping you up to date
WHY MORTGAGE CLIENTS NEED IP A DREADED PHONE CALL?
STATE OF THE NATION GOING OFF WORK SICK
STATE OF THE NATION BEING OFF WORK SICK • It’s estimated that 141.4 million days were taken as ‘sick - days’ in the UK, in 2018 • Often, this is for minor issues • Sometimes the sickness is more serious • Some people stay off work for long periods of time • Some people never return to work again off work sick Minor Serious Source – Office of National Statistics Nov 2019
STATE OF THE NATION BEING OFF WORK SICK • The average full time income in the UK in 2019 was £30,420* • Rounded to an annual income of £30,000 this equates to net take home pay of (based on England & Northern Ireland tax & NI deductions) : • £2,003 per month net or • £462 per week What happens to people and families when they lose their income? Source – Office of National Statistics Nov 2019 (*) Take home pay calculated for 2020/2021 tax year
THE VICIOUS CIRCLE THE PROBLEM Off work sick Off work sick Reoccurrence of Reoccurrence of Lose income Lose income incapacity incapacity Return to work Return to work too Bills to pay Bills to pay too early early Financial Financial Need time to Need time to Stress Stress recover recover
STATE OF THE NATION STATE BENEFITS
CLAIMING STATE BENEFITS STATUTORY SICK PAY • SSP (Statutory Sick Pay) is only available to Employees. • Claimants need to be off work sick for 4 or more days in a row (including non-working days) • The benefit level for SSP (2020/21) is £95.85 and is payable for up to 28 weeks Income Drop of 79% (*) £462 £95.85 Income SSP Source – https://www.gov.uk/employers-sick-pay/entitlement - tax year 2020/21 * Based on annual income of £30,000 per annum
CLAIMING STATE BENEFITS EMPLOYMENT & SUPPORT ALLOWANCE • ESA (Employment & Support Allowance) is claimable by employees after their Statutory Sick pay ends (28 weeks) • Claimants who qualify for the Work Related Activity group will receive an ESA benefit of up to £74.35 per week. • Jobseekers Allowance pays a benefit of up to £74.35 per week. • ESA claimants who qualify for the Support Group can receive up to £113.55 per week Income Drop Income Drop of 75 % (*) of 84% (*) Source – https://www.gov.uk/employment-support-allowance/what-youll-get Based on annual income of £30,000 per annum • • Figures based on tax year 2020/21
CLAIMING STATE BENEFITS CLAIMING ESA There are 64 pages in the current ESA application form. 55 of which need to be fully completed with information to support the claim Source - https://www.gov.uk/government/publications/employment-and-support- allowance-claim-form
STATE OF THE NATION SAVINGS
STATE OF THE PROTECTION NATION SAVING FOR A RAINY DAY… • According to a Money Advice Service survey in Oct 2018 10.7 million adults* in the UK rarely or never save • This is 21% of the population • 53% of 22 to 29 year olds had no money saved in a savings account or an ISA between 2014 and 2016 ** • £5,000 of savings could provide a replacement income (for the average annual income) for just over 10 weeks *Source: Building the Financial Capability of UK Adults – 2018 – Money Advice Service – link **Source: Office of national statistics – Oct 2018 – Link
STATE OF THE PROTECTION NATION REPLACING INCOME WITH SAVINGS 6000 5000 Savings 4000 3000 Savings 2000 Savings 1000 1500 1500 1500 500 500 0 Month 1 Month 2 Month 3 Month 4 -1000 -2000 *Savings not including any SSP the client would be entitled to Reference: 4 month income loss analysis - assuming average income of £30,000 per annum and average savings of £5,000. Monthly outgoings of £1,500
STATE OF THE PROTECTION NATION HOW LONG DO IP CLAIMANTS CLAIM? • Royal London’s claims statistics report published in 2019 that the average length of time for Income Protection claims is 9 years and 11 months • That’s the loss of 119 paydays Source: Royal London Claims Statistics – published 2019 (claims year 2018)
ROYAL LONDON AVERAGE AGE OF CLAIMANTS The average age of IP claimants with Royal London (new claims admitted in 2018) was…. • 43 years old Source: Royal London Claims Statistics, published 2019 - link
REMINDER OF NON-MEDICAL LIMITS
ILLUSTRATING THE CHANCE OF A CLAIM
ILLUSTRATING PROTECTION RISKS & SHORTFALLS Royal London State of the Protection Nation • Of all consumers surveyed only 11% felt they were likely to go on sick leave for three months or more • Only 14% of consumers say they're likely to contract a serious illness in their working life. Source: Royal London State of the Protection Nation 2019 - link
PROTECTION PRIORITIES RISK OF CLAIM • Bob, Male, 28 next birthday • Non Smoker • Earns £30,000 per annum • Probably will work until age 70 • No protection plans in place… What is the risk and chance that Bob would actually need to make a claim on a protection plan during his working lifetime?
PROTECTION PRIORITIES RISK OF CLAIM Lets imagine you had 100 clients like Bob on your client base… Source – Royal London Marketing Studio – February 2020. Risk Report. Male age 28 nb, non smoker, Analysis up to retirement age 70
PROTECTION PRIORITIES RISK OF CLAIM 5% or 5 in every 100! Lets imagine you had 100 clients like Bob on your client base… How many of your clients will die before their retirement age of 70? Source – Royal London Marketing Studio – February 2020. Risk Report. Male age 28 nb, non smoker, Analysis up to retirement age 70
PROTECTION PRIORITIES RISK OF CLAIM 17% or 17 in every 100! Lets imagine you had 100 clients like Bob on your client base… How many of your clients will suffer a critical illness before their retirement age of 70? Source – Royal London Marketing Studio – February 2020. Risk Report. Male age 28 nb, non smoker, Analysis up to retirement age 70
PROTECTION PRIORITIES RISK OF CLAIM 37% or 37 in every 100! Lets imagine you had 100 clients like Bob on your client base… How many of your clients will be off work sick for 2 months or more before their retirement age of 70? Source – Royal London Marketing Studio – February 2020. Risk Report. Male age 28 nb, non smoker, Analysis up to retirement age 70
PROTECTION PRIORITIES RISK OF CLAIM 50% or 50 in every 100! Lets imagine you had 100 clients like Bob on your client base… How many of your clients will make any kind protection claim before their retirement age of 70? Source – Royal London Marketing Studio – February 2020. Risk Report. Male age 28 nb, non smoker, Analysis up to retirement age 70
ILLUSTRATING PROTECTION RISKS & SHORTFALLS The chance What are the risks faced that any of by a typical client? these things could • Bob happen? • Age 28 nb • Non Smoker • Analysis to age 70 Source – Royal London Marketing Studio – February 2020. Risk Report. Male age 28 nb, non smoker, Analysis up to retirement age 70
ROYAL LONDON MARKETING STUDIO RISK REPORTS – I DON’T THINK I NEED IT? What are the risks faced by a typical client? • Bob • Age 28 nb • Non Smoker • Analysis to age 70 Source – Royal London Marketing Studio – February 2020. Risk Report. Male age 28 nb, non smoker, Analysis up to retirement age 70
ROYAL LONDON MARKETING STUDIO RISK REPORTS – I DON’T THINK I NEED IT? CI CI Repo eport IP R IP Repo eport Risk Risk Repor eport Source: studio.royallondon.com
5 SIMPLE STEPS TO SELL PROTECTION
5 SIMPLE STEPS TO SELL PROTECTION 1. Explain what a protection review/audit is and the purpose of this meeting today 2. Find out what’s important to them as a family? 3. Ask them how they would feel if they have just been paid for the last time 4. Talk about the risks they face 5. Prioritise the needs they want to address
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