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Income Protection with Tom and Roy

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Searching for Elephants - Episode 1

There’s elephants in the room. Welcome to the new LifeSearch podcast series Searching for Elephants. It’s fortnightly discussion and debate, interviews and insights, and real people’s real stories. It’s an honest look at the talking points inside and outside our business, our industry, our lives.

We’ve spent over 20 years trying to make life insurance - or protection as well call it - easier and more transparent. We’ve spent that same time making protection advice more and more accessible to anyone who wants it. So now it’s all landing on Spotify, Apple, and YouTube every fortnight.

Created and hosted by Angus Baigrie with regular appearances from his Dad, LifeSearch CEO Tom, we invite you to come and meet the elephants.

Angus - Hi, everyone, and welcome to Searching for Elephants, the LifeSearch podcast. I'm Angus Baigrie, Tom's son, and the creator of this podcast. My brother Patrick composed the music you're listening to, and mixed all the sounds too. So yeah, it's a family affair. Searching for Elephants gives us a chance to talk to elephants we really admire, and a place to talk to them about the elephant in the room.

November has been IP month at LifeSearch, we don't think income protection gets enough love across our industry. So LifeSearch is giving it some. If you are interested in IP and want to learn more, head to LifeSearch.com/IP. And learning more is exactly why I'm sitting in this socially distanced room with two titans of talking. And their favourite subject, IP. Afternoon, guys. Thank you for being here. Dad, do you want to introduce Roy?

Tom - Ah, Roy McLoughlin. One of the good guys, Roy. He's been trying to make protection as a whole better since before that term was in common use 20 years or so since I first bumped into Roy trying to do good. And as chairman of the income protection Task Force, he seen a fantastic overall growth of the market, largely as a result of the Seven Families initiative, which spurred our whole market on, which was an income protection taskforce brainchild. So huge respect for Roy.

Angus - He also has a really lovely podcast, which is well worth a listen called Inside IP very much, right? What do you think my dad?

Roy - How do we introduce Tom Baigrie? One of the first things that you come across when you meet Tom is his passion. And I think that's why he has so many followers and so many people who are infused by just that raw passion and belief in our plan. And it's interesting when you go around the marketplace, isn't it? Belief is such an important thing. And with Tom, you get that in noodles. And again, as Tom said, we go back a very long way now, you know, probably time for some younger people to enter this market. But you know, that passion and that belief in income protection, is hopefully why we're all sitting here.

Angus - Fantastic. Thank you both very much. And the first thing and I guess this is a question more for the consumer than the market. But I would like you both to tell me what IP is and what IP is not. Roy? You want to start?

Roy - Sure. I mean income protection is, in my humble opinion, the first product that should be sitting at the top of hierarchy protection table and also should always be mentioned in the context of holistic financial advice. We're a very disparate and siloed industry. We have wealth managers, we have mortgage brokers, we have protection specialists, we have employee benefits, specialists. But you could argue very forcibly that all of those various silos should be talking about income protection, foremost, alongside everything else that they talk about. And that's what makes it quite unique. The other difference is that to be quite frankly, one of the problems with income protection is that historically, a lot of people haven't understood it. And yet here comes along a COVID crisis. And for the first time ever, you've heard income protection been talked about at the despatch box in the House of Commons, you've heard income protection talked about regularly by our chancellor. So it feels like there's a bit of a seat at the moment as well, because suddenly, the man on the Clapham Omnibus has now heard of this terminology.

Angus - But for the consumer, for me, someone who doesn't know, jack, tell me what income protection can do for me and my life.

Tom - It is the primary way you should look to protect yourself against the financial effects of physical or mental catastrophe. What happens then? What's your coping strategy for when, frankly, you can't generate an income? Well, obviously, the welfare state still exists. So that's where you would turn perhaps rich relatives or whatever it might be other coping strategies, but it doesn't take a moment analysis to realise just how flawed most of those coping strategies are, and how frankly, they are not really to be relied on. Income protection is how you take that problem and solve it for yourself. You pay a small monthly premium, and you get a monthly benefit paid to you after a short waiting period to make sure that your condition is serious. It's not just for coughs and colds, this stuff, but that income is then paid to you as long as you are unable to work because you are disabled no matter how that's caused. So income protection is, as Roy says the first part of it, what does the freelancer do if they can't earn, well if it's because there's no work then that we can't help with. But if it's because they're disabled, then this is how they would get an income.

Roy - The other important point here is just to see the prevalence of it in society, the amount of people are off ill is far higher than most people would expect. So if you think about it, if that's more likely to happen, this is why income protection should be talked about first and foremost. But there is another point to do with awareness. And the issue here is that many people, I would argue, most people would assume that if they were I feel two people would look after them, two entities would look after them. The first is the state. And the second is their employer. And actually, the whole point
about talking about income protection is to make people aware of is that actually accurate, and make them go and check their facts, or the advisor can help them check those facts. And what most people will conclude is that both of those aren't actually the case. So a great example is that only 8% of working people in the UK have any form of group income protection of their workplace. And yet so many people think they're covered by work with one doesn't want to get political in a situation like this. But, you know, Universal Credit is very much in the news at the moment that you know, the ability to claim money back from the state if you become ill. But actually, if you look at the amount that the state pays you out, okay, it is woefully inadequate.

Angus - Absolutely. I think the the figure on that is...

Roy - It's 96 pounds a week.

Angus - Thank you, which for a 28-year-old, like myself might suffice, but for a family of four. Yeah, you can never do that on 96 pounds a week. So yeah, talking about COVID and how that's changed the world. How has this specific instance, affected the industry and affected IP sales and how the world regards IP?

Tom - Well, as Roy said, the first thing is that the words income protection were used from the start to describe a government intervention of a scale never before seen, or even imagined, really. So I think what the Chancellor was talking about them was essentially an unemployment insurance rather than a disability insurance. But nonetheless, the concept of one's income being vulnerable to income shocks, no matter how they're caused, is suddenly totally there and dominating in the public mindset. So income protection has suddenly become a word that everybody's heard at least once. And the fact that our income protection is slightly different from what the Chancellor meant, it is all part of the same continuum. Absolutely. So we're in the Zeitgeist right now. And March was LifeSearch's biggest ever month for protecting incomes, as we call it, that was 1272 incomes we protected that month. This year, we'll get to around 9000. And that is up about 25 to 30% on last year. So that shows that this product is becoming much more prevalent in the consumer mindset.

Roy - The other game-changer is one of the biggest objections to income protection up until this year was not only will it not happen to me, but it doesn't happen to anyone that I know, I don't think anyone can say that anymore. I think unfortunately, all people now have somebody in their family, their close support group, their peers, their friends, you know that their colleagues at work who have been touched by this in one way or the other. And therefore, suddenly, again, this is in a public consciousness, people are now saying, what happens if this happens to me, what was really interesting about the Seven Families campaign, which I'd really encourage all of our listeners to, to go in and have a look at, with two or three of the interviews in particular, saying we were just normal people, we were watching Strictly Come Dancing on a Saturday night thinking this will never happen to me. Again, suddenly, this is happening to people. So you've got to you've got a bit of a game-changer, you've got a bit of a seize the day moment. And I think it's really important that the industry comes together and collaborates and talks about this story talks about this message, then if the consumer concludes, I don't want to do anything about this. I think that I'm looked after I think I've got money, I think I've got savings, whatever it is, then that's their own natural conclusion. But you know, this is a journey, this is a story this is a this is a situation that needs to be talked about.

Angus - So given that Roy, how could the industry raise IP sales given that it is in the Zeitgeist?

Roy - Collaboration. Okay, we have to come together. And as a great example of where this has worked. We are, again, for many negative reasons, a disparate industry, but five years ago, suddenly insurers, reinsurers, distributors, advisors, and different types of advisors. You know, LifeSearch and Cavendish Ware are completely two different companies, but everybody came together. And very unusually the press as well. And they collaborated on several families. And I don't apologise for mentioning Seven Families a few times in this interview, because it was a great example of if we come together. We can do something. So to answer your question, this is a time when collaboration is needed more than it's ever been before. And we just need to talk about this subject. And we need to talk about it in a very honest and an open manner.

Angus - So, yeah, tell us a bit more about Seven Families.

Roy - If you listen to the classic marketeers in this country in a classic, you know, advertising people. In the UK, everybody talks about telling stories the whole time, okay, and it's used in all sorts of industries. Our industry didn't tell stories very well, okay. And for me, Seven Families was probably the best example. And many would say, the first example of us coming together and telling very easy, seven different stories. And a reason why the campaign was so successful was that those stories are resonated with people, because they could identify. And again, what you've got to understand what Financial Services is that if people can't identify with a product, they're not going to do it. And I think that, you know, the power of Seven Families was that it didn't matter what you earn, and also what you did for a job, there was a story in those seven that you could actually say, Oh, that's either like me or something, you know, something someone like me?

Tom - Yes, I couldn't agree more with you. In fact, I think the what the industry needs to do when you talk about collaboration, is needs to get together and give itself developer far greater budget to do a another round of storytelling on a consumer-facing scale. The problem with Seven Families, or was that the budget was very tight, because it wasn't supported by all insurers. But the end result was that what was created was so powerful, it had a huge effect on those who saw it, particularly the industry. So suddenly, persuading advisors, people who talk to customers to talk to them about income production suddenly became much easier, you had a tool to use that would really resonate with anybody with the problem of Seven Families was simply that it didn't break into the consumers' Zeitgeist, I think it would be a lot easier for a new version. To do that. Now, I think that the model is very, very good, the model needs to be copied, it needs to be at a grander scale. And the trouble is that it's it's a hell of a lot of work, to set it all up and run it on a voluntary basis. So it would have to be a commercial exercise. And that'll take quite a lot of doing and thinking. But LifeSearch certainly would be very keen to get involved and back that.

Roy - The other game-changer is the attitude towards mental health. When we first set up several families, and it's only five, six years ago, I would still suggest that mental health was a taboo subject to most people. Again, I would challenge our listeners to say, who doesn't know anyone that has been touched by this, particularly the last six months. And because of that, and because the fact that it isn't a taboo subject is something that we're all now talking about openly and society is talking about openly, I think this is a great opportunity to revisit the concept of Seven Families and is conceptual, and talk about mental health in particular. Because if you look at mental health and its proliferation in society, actually the only solution to helping both from an added value benefit services, but also from a, you know, a monetary issue is income protection. And again, that makes it quite an unusual product, because we're not to cry life insurance are critical. And so one second, as you know, any protection specialist would talk about.

Tom - Well, I would this critical illness protection a bit, I would say that it certainly comes a long way after IP in terms of the hierarchy of customer needs. And it is a great disappointment, shame, really, that the lesser product outsells the better product by a huge multiple, simply because the lesser product critical illness cover does resonate with consumers very easily. The fear of cancer and heart attack and stroke is with all of us, often really, whereas the more conceptual issue of long term disability, it's just a harder thing to get consumers to think about. So it's almost like we've taken the soft, easy route with life and kick what critical illness cover what we actually need to do is do what's right and take the longer harder better route to getting income protection to outsell the other two.

Roy - It's a really strange and fascinating concept, isn't it? Because critical illness, and I'm not for one minute decrying it I you know, I advise on critical illness on a daily basis, but almost became sort of de rigueur, didn't it people were talking about openly, you know, people would quote Kylie and lots of high profile cases of people having various cancers is Andrew Marr with his stroke, yes, and so forth. What we didn't really have is people talking about people being off long term male. And again, this comes back to the previous point, I think that we're in a vacuum here, we're actually because this is now happening to most people. We can now start talking about it more openly, in a way that we never could before. But Tom's point is so valid, you know, when you look at statistics, okay, The likelihood of having a critical illness to dying to income protection, it is very roughly five times income protection, three times critical illness, one times dying. So guys think about this, we're actually advising on the wrong product the wrong way around, which again, to caveat is not decrying life insurance or critical illness. But it should be done alongside income protection. And I think there's an education piece for, you know, for the advisors, as well as the consumer, as to let's have a look at what's more likely to happen. And let's ensure that first.

Angus - Absolutely. And just for the consumers out there, could you tell me specifically what IP does versus Critical Illness versus anything else?

Tom - Absolutely. Critical Illness pays out upon the diagnosis of a prescribed condition. So if you have had a heart attack of a certain level of severity, then the policy will pay out, there's a list of conditions, you have to have one of them it has to fit the condition, and then it pays out. Now, that list is very wide nowadays. And there are lots of things like partial benefits, if you don't quite make the level of severity, etc, etc. The policy itself flow is relatively complex when it comes to claiming that the diagnosis has to be checked, but it has the great advantage of being paid on that diagnosis. So overall, it comes across as a very simple sales pitch. This policy pays out if you get cancer, heart attack, stroke, or any other really critical illness on our list of conditions. You know, that's a pretty straightforward thing to say. With income protection, the equivalent is this policy pays out if you are disabled and unable to earn for whatever reason, that does not include unemployment, unless that's put on as a specific rider. Now, I was just thinking when Roy was talking earlier, he mentioned Kylie and Andrew Marr. People who suffer cancer or stroke, who are in the public domain are generally okay to talk about it. Or are there lots of examples where people tell their story and congratulated for brave fights against, you know? You don't hear people talk about the fact that they are simply long term unable to perform their job, because they have mental health issues, or because they are, you know, they've got spinal complications. These are not stories that are told particularly, and we've got to get them told, I guess that's the it's a question of actually making fashion.

Angus - And just to be clear, and please feel free to correct me if I'm wrong, the income protection pays your monthly salary. So for the month, you are not working however long that is you receive a monthly salary instead of a lump sum.

Tom - Very good point. To clarify, you're exactly right. Again, critical illness, as you say, pays out the lump sum. With income protection, it's a monthly income being paid, it's not actually salary, but it's a monthly income being paid, which is there to provide the equivalent of salary or freelance earnings. Or for carers, a kind of minimum standard of which they can continue to care.

Roy - It's fascinating, actually, they estimate in the UK at the moment, there are 5 million self employed workers. And I think everyone's assuming that once you know, furlough unfortunately disappears, that number will go up. Because what will happen is that more people will become entrepreneurial, and set their own companies up and the number of self employed will probably increase, I'm including in their people own their own, you know, their own one person limited companies. Now, if you think about it, that's great, okay, and we will have this entrepreneurial spirit in the UK, because that's how we bounce back. We've done it before, and we'll do it again. But suddenly, you will have a humongous amount of people in society, okay, whose exposure is greater than it's ever been before. And one of the worries here is that, you know, as good or bad as you might argue, the government's done, this support that's been put in has to be paid back at some point. Okay, so we're all going to, you know, we're all going to be expected to shoulder that burden at some point, which just makes me speculate that we'll be moving further away from reliance on the state. And suddenly, you've got this almost, you know, perfect storm of more more people working for themselves, who don't have as much reliant on the state, if something goes wrong, we know things go wrong, because the numbers are gonna tell us they're gonna go wrong. Therefore, ergo, the need for income protection is going to be great it's ever been. But the crucial part here, and I'll surely see where we both agree, is it has to be advised. And I think one of the issues here is that in the industry, we love going around saying, well, more people are going to take out income protection, of course, that's gonna be a natural increase in the market. But it's not that interesting to people out there, it still needs explanation, and therefore by definition that still needs advice.

Tom - To do its job properly, the product has to have a few complexities. And when you face complexities in a product, you need a bit of advice, the idea of making a product that doesn't have those complexities. is, well, frankly, I think pretty foolhardy, because what is needed is a monthly income. Obviously, it can't kick in after one day of disability, there's got to be a waiting period to ensure the claims are not. The problem is just not rendered totally unaffordable. It's got to have a period that lasts for either until your retirement pensions kicking in, ideally, but maybe that will cost 30,40,50 pounds a month. And if you can only afford 5,10,15,20 pounds a month, then you have to compromise on that. So there are nuances to the product which need consumers to make really pretty educated decisions, and to decry the product for that, well, let's simply to ignore the condition that it is, it's ensuring personal health, and that's complex stuff, all our bodies are very different. And what takes us down is very different. So yeah, it's a product in which consumers need a bit of help to make the right decisions. Yeah, we should be there encouraging them to do that, but also raising awareness of it, and persuading them of their need. That I think is what Roy was driving at.

Roy - My favourite anecdote is when I was going around talking to about Seven Families, obviously, we talked to lots of advisors, but actually talked to some normal consumer, real people. And I remember distinctly being in a room full of 250 HR professionals, experts in cricket ground, and it was a mental health, you know, seminar, and they got me to stand up until about Seven Families. So remember, these are HR professionals. So I said, well, a quick show of hands, who can tell me within that group of people? Or who could put their hand up now and explain your sick pay policy at work? How many hands do you think went up in the air?

Angus - Don't tell me, don't tell me zero.

Roy - It was about five. And you know what, as I drove back from Birmingham that day, I thought, 'How interesting is this?' This isn't this is a world where people who are in HR, who should be the first person who could explain to people what their sick pay, you know, situation is, don't understand it well enough. And therefore, let's take that across to our individual clients or individual customers, if your HR person doesn't, can't tell you what, what you're going to get when you're off ill. There's no way that you'd know as well. And I think there's a lesson here for advisors. And I'm sure Tom and I have both heard advisors over the years who say, 'Yeah, but product protections, you don't really need it, because all of my clients are covered by sick pay at work'. Well, actually, No, they're not. And I think part of this is to educate and make advisors aware, because if the advisor is aware, then they can very easily communicate that to the actual consumer.

Angus - So what would you say to those advisors who, because of the complexity of the product, don't feel quite as confident in selling it. And so don't attempt to sell it? How would you encourage them?

Tom - There are two routes really, the first is to accept that this is not what you're going to be good at if you're a mortgage broker, or a financial advisor or a financial planner, and to signpost or refer your customers to people who do it all the time. So my first port of call would be to say, 'Are you going to take on this burden yourself as a financial professional? You could be an accountant or a solicitor or anyone who gives customers advice, clients advice? Or are you not?' Make that decision If your decision is no, it's not what I want to talk about. Then every time you meet a customer who has this need, you should ethically signpost them refer them to someone like LifeSearch, or the new Biba Find a Broker service, which you can find on their website. So that would be the wider guidance I would give to the wider market again, who are going yeah, I hear everything you say, guys, but really, it's not for me, it's not my job. I'm a mortgage broker. Well, yeah, you should protect your family's incomes, your mortgagees incomes as well, that's that should just be seen as part of your ethical tools of the trade I'd suggest. So if you don't want to do it yourself, referred to people who can, and to those who are already doing it, ready talking to customers about income protection, but I'm not sure quite how to do it, you can easily send them a link to the Seven Families to say Have a look at this. This is the this is another way of doing it. But in essence, once you start explaining to customers, and this is what LifeSearch has found, is that once you start explaining to customers, their needs in this area, briefly without being silly, what happens to them if they lose their income? in broad terms, you'll find they get interested very quickly. So it's an internal barrier, you have to conquer. The client isn't sitting there go. Don't tell me about this stuff.

Roy -  Yeah, I completely agree. You know, our two sister professions, lawyers and accountants signpost all day long, so why don't we do it? But I'd also say to people listening to this, if you're not selling income section on a daily basis, why are you not? And if there are facts that you're not sure about, or you're not aware of what people get back from the state or for their employers, isn't it sort of duty of care to go and find out about this yourself. So we're not telling everybody in the UK who advises that they should be talking about income protection, but they should certainly not dismiss the subject and wherever they do it themselves so signposting. We want this to be, you know, top of the hierarchy of needs.

Tom - I disagree with, I don't see how you can call yourself a financial advisor if you don't talk about income protection.

Angus - Okay, one final question, just to steal a little bit from Roy's podcast, if you had a magic wand, and with that magic wand, you could change one thing about the IP industry overnight. What would that be?

Roy - I'd like to say something like the government actually, I think there's a duty of care here, from the government's point of view. And I think there's a really good example where self sufficiency has worked relatively recently, that's been a roaring success. And that is auto enrolment, pensions. If you think about it, everybody in the UK now who's employed now has a pension autorama has been a great success story. Auto enrolment is only about one subject, and that is self sufficiency, i.e. when you come to retire, you're going to need to look after yourself, guys. Okay? Isn't the concept exactly the same if you become ill, and therefore, my one wish would be to turn to government and to the influences and openly encourage employers to tell their staff what they get if they're off ill, okay, bring that subject up, make people aware of it. And then lets not, let's not insult the consumer, they can form their own conclusions. And there will be some who will say, that's fine. You know, my parents would look after me, I could sell my house, I can go and eat beans on toast for the rest of my life. But that's their choice. We're leading that horse to water. And I think some government intervention, just to make people aware, would be you know, my, my golden wish.

Tom - I get, I'm on your side, right. I'm on your side there. Let's let's keep trying because we have made quite a lot of effort to get government to see the side of it, we are making some progress. But that is a big one. For me, I'd focus on the protection industry itself. All of those listening to this podcast, know people who don't recommend income protection, who never who never talk about it. Possibly, because their online journeys are very short and focused on life insurance, or life and CIC, possibly, because they are non-advisors, they just don't like talking about income protection, because you really have to give advice. A huge amount of our overall industry's business is done by such people, is done by people who don't bother to raise in the consumer's mind in any way the idea the need for income protection, when they are talking to them about life insurance and critical illness. I think that's a shocker. I really do. I think we should have an industry in which all the key required products that consumers need are talked about whenever one is. Now I think protection advisors do that more and more and more and more. And that's why our market is growing. I think protection non-advisors need to get into the space. And I think online journeys need to link up to this space that would open up a whole new market in reality and introduce consumers to income protection far, far more regularly. So that's my appeal. That's the LifeSearch appeal. We used not to do very much income protection. And now as I say, We protect 9000 families a year. Whatever you might be able to do, you can do. If you think about it and try enough. And frankly, if you call yourself a financial services professional of any description, you've got to be talking about income protection.

Angus - Alright, there you have it. If you aren't talking income protection then get to it. And that is it for our first episode. Lifesearch.com/IP is the place to go if you want more info. Our next episode will be coming out very shortly. So if you like listening, hit that subscribe button, give us a like or leave us a review. They all help enormously. Thanks for listening guys. And see you next time. Lots of love, LifeSearch.

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