Risk specialist adviser and consultant, Chris Unwin, takes you through his simple, but well-reasoned argument about why every client and prospective client should consider holding both TPD and Trauma insurance as part of their protection portfolio.
In his second article, Chris delves further into Trauma insurance and outlines his argument as to why trauma insurance is a product that is relevant for clients of any age; not just for those over 40…
Trauma / TPD Cover: Keeping It Simple
When Trauma Cover became a new addition to our personal protection product suite back in the early 1990s, it opened the door to potential confusion on the part of clients and advisers as to the need for Trauma Cover AND TPD, and it became crucial to understand why both products are essential components of a client’s personal protection package.
Have you or any of your clients ever had any queries or doubts about the need for TPD and Trauma Cover? I often used to have clients say to me “Aren’t TPD & Trauma Cover for pretty much the same things – why do I need them both?” And because Trauma Cover tended to be the last cab off the rank because TPD was often coupled with Death Cover in their employer super, it just made it that more difficult to get proper amounts of Trauma Cover over the line.
Let’s also get one thing clear – TPD is in my opinion a grossly inferior product to Trauma Cover. You only have to consider the relative eligibility for claim with both products to work that out. However, despite its relatively small eligibility for claim, TPD remains an essential piece of the jigsaw and a crucial component of our clients’ personal protection packages. So how can we ensure that both types of cover are willingly purchased by our clients?
Only by combining the two types of cover can we minimise the medical cracks through which our clients could fall in the event of claim
For the last twenty odd years I have not promoted TPD to my clients as a separate product to Trauma Cover – I have essentially treated TPD as just another trauma. So, whatever the recommended amount of Trauma Cover may be for a client, it will always include the same amount of TPD.
The way I present it to a client is that the TPD cover is a necessary safety net on their Trauma policy designed to capture those medical conditions that are not included amongst the specified ‘traumas’ in their Trauma policy, but which could constitute a total and permanent disability – the most important, including back problems and mental health issues. Only by combining the two types of cover can we minimise the medical cracks through which our clients could fall in the event of claim. Shouldn’t that be one of our primary objectives as a risk adviser?
As far as the issue of whether TPD cover should be held inside or outside of super is concerned, most of my clients are white collar employees, and therefore they will already have some TPD attached to Death Cover under their employer super and now they will also have some TPD attached to their Trauma Cover outside of super, so they end up with the best of both worlds!
Is Trauma Cover Just For Old People That Get Sick?
Do any of you struggle to sell Trauma Cover to the under 40s because of the perception that Trauma Cover is for old people that get sick and then you struggle to sell Trauma Cover to the over 40s because it’s too expensive? If so, read on.
In my experience, most advisers’ opening conversations with clients when it comes to Trauma Cover will focus almost exclusively on “The Big 4”, namely Cancer, Heart Attack, Stroke & Bypass Surgery. The problem with this is that the large majority of clients under the age of 40 will now “switch off” because Trauma Cover has already become irrelevant for them as their perception is that it is a type of cover for old people that get sick (you may remember from a previous Chrisism that perception is reality in the mind of the person doing the perceiving!).
We need to understand that the reason why over 90% of Trauma claims in this country are down to “The Big 4” is because not enough advisers sell Trauma Cover to clients under 40 – let alone under 30.
I believe that we have a unique opportunity with Trauma Cover to claim that it is targeted specifically at every single client we sit in front of, irrespective of their age. The key to motivating your clients to want the ‘Miracle Product’ is to ensure that their perception right from the start is that this type of cover is specifically targeted at and relevant for them. I believe that clients of all ages can be motivated to want as much Trauma Cover as they can reasonably afford, but we need to recognise that clients of different ages will be motivated to buy Trauma Cover for different reasons.
Clearly the over 40s will recognise the ever higher incidence of “The Big 4” as they get older and what we need to make sure they understand is that they should buy as much as they can reasonably afford as early as possible because the rate at which the premium increases gets ever steeper with age and this is only because the likelihood of them suffering one of “The Big 4” is increasing at exactly the same rate. In addition, I believe we need to suggest to our clients that they will probably be better advised to have a lesser amount of Trauma Cover which is sustainable all the way to age 65 or 70, i.e. on a level premium rather than a higher amount that they will have to give away sooner rather than later because it becomes too expensive on a stepped premium. Ideally, of course, they will end up with a combination of the two.
However, if you are introducing Trauma Cover to a client between, say, 21 and 35 years of age, then the key is to promote it as being specifically designed to cover those medical conditions to which this age group is most prone – and that is clearly not “The Big 4”. The most important “traumas” to focus on for this age group are the accident related traumas, all of which make up the most common injuries sustained in car accidents, namely paralysis, major head trauma, severe burns, loss of limbs and coma (see: P-Plater Protection Chrisism). In addition, you should refer to the neurological conditions most prevalent with younger people, the most important being multiple sclerosis for which the average age of diagnosis in Australia is 31. It is degenerative and incurable and it can take up to 40 years to kill you, which also makes it a very expensive medical condition. Finally, cancer shouldn’t be left off the table for this age group – especially breast cancer for younger females.
I also believe all Trauma Cover sold to clients under 40 should be on level premiums – more on that in a future Chrisism.
Hopefully this has helped you sell more Trauma Cover to younger clients as well as older clients.
Chris Unwin is a financial adviser of 37 years standing and has been a specialist risk adviser for the last 22 years. His training and consulting business has operated for 12 years and it specialises in helping advisers across the full spectrum of experience with their client engagement skills, both in the risk advice specific space as well as in the more generic soft skills space.
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