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IFA claims providers used tough tactics

Published 10 November 2011 | By bobbycook

Published in FT Adviser 10th November 2011

Some general insurance providers are pressing advisers to give them more business or risk losing renewal income or trail commission, an adviser has claimed

Bob Cook, principal IFA for Essex-based Platinum Financial Consulting, said although insurers were technically within their contractual rights to push for more business, it “does not make it right” because the consumer ends up paying the price.

He claimed: “We have the situation of insurance product providers pressuring professional introducers to give them business or lose considerable renewal income.

“In the past month both Paymentshield and Select & Protect have threatened to reduce our trail incomes significantly or even stop them altogether. While their terms of business agreements might allow them to do this, in a regulated world this does not make it right.”

Mr Cook claimed that Paymentshield told him that if he did not give the company new business, it would cut his commission to 5 per cent.

He also claimed Select & Protect had threatened to stop paying altogether.

Mr Cook added: “If a provider’s product stops selling then the onus is on the provider to redesign the product to make it more attractive to our clients.

“It is completely unacceptable to bully previously loyal introducers because they are now offering their customers what they believe is a better product.”

Mr Cook said the outcome would mean the customer loses because the IFA might feel forced to sell a slightly less suitable policy, rather than risk losing renewal income built up over the years. He added: “This is a clear breach of treating customers fairly. The contract term is hidden from the customer and the FSA sees no reason to investigate. The outcome of such a condition is the market becomes unfairly skewed and best advice takes second place.”

A spokesman for Paymentshield said: “In line with the dormancy clause in our terms and conditions, we can confirm a number of brokers no longer active with Paymentshield have been notified of a change to their commission. However should these intermediaries demonstrate a return to active submissions then their commission will return to its previous rate.”

A spokesman for Select & Protect said: “Select & Protect is committed to delivering on our treating customers fairly obligations. The terms of business between Select & Protect and its intermediary partners does allow us to reduce or cease paying commission to those with who we do not have an active and ongoing relationship. We exhaust every avenue before taking the decision to reduce or cease paying commission.”

The FSA declined to comment.

Posted in Platinum In The Press | Leave a comment

Confuse Death in Service benefit with Life Insurance at your peril.

Published 31 October 2011 | By bobbycook

Many employers offer their employees an additional benefit called Death in Service benefit. As the title suggests it is a cash benefit paid to the spouse, family or estate of the employee should they die while still working for the company. Typically the payment equates to a multiple of annual salary, normally between 2 and 4 times annual salary. Even for people on modest incomes this could result in a payment of over £100,000.

While this should be looked upon as a welcome additional benefit, it is a fundamental mistake of the employee to consider it as an alternative to holding their own life insurance. As Cathy Luzmore of Declined Life Insurance explains “People need to remember that the cover is entirely linked to their employment and their employer. While people may feel confident today that their employment is safe, we have seen too many times that things can change, and there are numerous reasons why somebody may not be working for the same company in even a years time.

“Somebody doesn’t have to have done something wrong to lose their job, simple things like, enforced redundancies, take-overs and mergers can all happen and result in you losing your job. Your employer may even decide to relocate to save money, just take the current BBC move from London to Salford, there will undoubtedly be casualties from that move” Ultimately your employer could decide that continuing to offer the benefit is too expensive and stop the scheme..

A life insurance policy that you have bought is completely under your control. As long as you continue to pay the premiums you are covered. Irrespective of your employment situation you can be certain that your home and family is protected.

Bob Cook Principal IFA at Platinum Financial Consulting says, “It may sound harsh, but I truly believe that anybody who relies on a Death in Service benefit to protect a valuable asset like a mortgage or other liability is being extremely foolish and exposing their family to unnecessary risk. There are too many things that can go wrong. People may feel that if and when they leave their current employer, if their new employer doesn’t offer a death in service benefit they can by cover then. Well maybe they can, but equally their health or lifestyle may determine that they are uninsurable and they simply can’t get insurance. If they were then to die, their family has not only lost a valuable income, they may also have to lose their home”. Bob says “Death in service benefit is a great additional perk, but do not protect the things you care about and love with it”.

Despite the comments above the website http://www.declined-life-insurance.co.uk/, helps many people replace the cover they got from their Death in Service Benefit from their employer. They can cover people from as little as 30 days, while they are between jobs , or for many years.

Posted in Life Insurance | Leave a comment

Lump Sum or Pension

Published 17 October 2011 | By bobbycook

This article discusses general concepts and ideas, rather than any specific policy or plan. This website does not contain personal advice based on your circumstances.

By Bob Cook

One of the most common searches on our Best Pension Annuity website is by customers who are uncertain whether they should take a lump sum from the pension or just an income. Perhaps the most important thing to say at outset is that they can have both.

In fact pension rules dictate that typically only 25% of the pension value can be taken as a pension lump sum. The reason for this restriction is that the lump sum paid to you is not subject to income or any other form of tax, it is a pure Tax Free Cash lump sum.

Depending on your circumstances you either have to convert the remaining 75% of your fund into a regular income known as a pension annuity or you can leave it invested to take an annuity later, it you are not retiring yet.

Many people who want to realise Tax Free Cash and are not yet planning to retire, tend to leave the remaining 75% of the fund invested. There are two main reasons for doing this. The first is that all annuity income is taxed. Therefore if you are working and paying tax on your income, this additional income would also be subject to tax and possible high rate tax at 40% or even 50%.

The other thing is that the amount of income you will receive from an annuity will be higher the older you are. Therefore taking an income from your pension before you retire or before you need to, is generally not a good idea.

The issues about whether you should take your tax free cash or use it all to purchase an annuity is more complex and will largely depend on your circumstances and your needs at the time. The obvious thing to say at this point is that in my experience the vast majority of people will take a lump sum from their pension, the key being those magic words ‘tax free’. If the lump sum is not taken and is used to purchase a pension annuity all of the income paid to you is eligible for tax.

Even if you do not have an immediate need for a pension lump sum. By keeping the money invested on deposit, it can provide a useful emergency fund to pay for those unexpected bills that might occur in the future.

Of course we do have customers who elect not to take Tax Free Cash and instead convert their entire pension fund into an income. In the main these tend to be people who heed to maximise their income and would rather see their annuity income increase by a third.

Ultimately only you will know what is the right decision for you, if you are however unsure you should consider taking financial advice.

Posted in Retirement Planning | Leave a comment

Income Protection FAQ – Exclusion Periods

Published 14 October 2011 | By bobbycook

It is important when reading these notes that it is understood that no specific policy is being discussed, but rather the typical terms and conditions operated by most insurers. Any policy you buy may have differing conditions and you should check your policy details to ensure you fully understand the terms of your policy.

By Bob Cook

All Income Protection policies that cover unemployment include something called an ‘Exclusion Period’ This period only applies when you first buy your new policy and based on the majority of policies currently available on the market, the typical length of the exclusion period is 120 days. Some policies may have a longer exclusion period and others shorter.

Using the example exclusion period of 120 days above. In the first 120 days after buying the policy and unemployment that occurs during the 120 days, or if you become aware during the 120 day period that your job is at risk then if you subsequently do lose your job you would not be eligible to claim. This would be the case even if the redundancy occurs after the 120 day exclusion period has expired. If the event, or notice of the event occurs in the exclusion period, you are not covered.

There is typically no exclusion period for accident and sickness claims, and the unemployment exclusion only occurs at the start of the policy. Once the exclusion period has expired, and nothing has occurred during the exclusion period to indicate your job is at risk, then you are fully covered.

Any policy that covers any form of unemployment or redundancy will have an exclusion period no matter what you call the policy e.g. Income Protection, Redundancy Insurance, Accident Sickness & Unemployment Insurance (ASU), Mortgage Payment Protection Insurance (MPPI) etc.

In the case of Mortgage Payment Protection Insurance if you are buying the cover at the same time you are taking out a new mortgage or re-mortgage, the insurer may reduce the exclusion period or even waive it completely. Continue reading →

Posted in Redundancy Insurance | Leave a comment

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