Chris Unwin ‘Chrisisms’

Stepped vs Level Premium Trauma Cover – My Lightbulb Moment

Are you still recommending stepped premium Trauma Cover to your clients? I was too – until my lightbulb moment in 2007. To find out what my lightbulb moment was, read on…

For some 15 years between 1992 and 2007 I, like most advisers, was recommending stepped premiums to my clients for their Trauma Cover. After all, it was hard enough already to get clients to take out another product on top of their existing IP, Term & TPD cover without raising the bar even higher by increasing the upfront cost!

Then one day in 2007 I attended a 2 day Living Insurance Conference put on by The Risk Store out at Homebush in Sydney and one of the sessions on the first morning was to make a huge difference to myself, my consultancy and my clients in the most positive way possible.

The presenter of the session in question was a gentleman by the name of Nick Kirwan*, who at the time was the head of the ABI (Association of British Insurers), and he was talking about Trauma Cover in the UK. He casually stated that in the UK 25% of the working population owned Trauma Cover. This completely blew me away as only approximately 2.5% of the working population owned Trauma Cover at that time in Australia! I thought maybe he’s got the decimal point in the wrong place, but I thought I’d better check it out.

So I caught up with Nick at the morning break and said: “ That stat that you gave of 25% of the working population owning Trauma Cover in the UK – that’s pretty amazing given it’s only about 2.5% here in Australia. Tell me, what is the status of stepped vs level premiums when it comes to Trauma Cover in the UK?” And Nick looked at me as if I was from another planet and said: “What’s a stepped premium?! It turned out that they didn’t have stepped premiums in the UK – in fact they didn’t even have level premiums as we know them. They only had guaranteed premiums i.e. once you had the cover in place, the premium was guaranteed not to increase for the life of the policy –  HUGE LIGHTBULB MOMENT!

I immediately thought to myself: “Well, of course 25% of the working population in the UK own Trauma Cover, because everyone who bought it in their 30s and 40s have still got it in their 50s and 60s as they are still paying the same amount of money for it!

I realised that from that moment on I would have to be recommending level premiums as the preferred mode of premium payment to all of my future clients irrespective of age and furthermore I had to go back to all of my existing clients who were paying stepped premiums for their Trauma Cover and recommend that they switch to level premiums.

As far as the clients I took on after that 2007 lightbulb moment are concerned, the large majority of them own some or all their Trauma Cover on a sustainable basis, i.e. level premium, and I’m proud to say that ALL of my existing clients at that time converted at least some (if not all) of their Trauma Cover to level premiums and how much they converted was only ever a matter of affordability, with many clients opting for a smaller sum assured that was sustainable to age 65 or 70 rather than a larger sum assured that they would have to give away in the short term due to its unaffordability.

• Nick Kirwan is now Policy Manager Life Insurance at the Financial Services Council in Australia

Child Trauma Cover – An Absolute Must

If you are not currently making sure that all eligible children are covered with Child Trauma Cover on their parent’s adult trauma policy, then you need to read on and rectify this situation.

I have had a quite a number of advisers who have told me that they don’t always make sure that eligible children are added to one of their parent’s adult trauma policies and the reason they often give is that the parents don’t really want to have that conversation because they don’t even want to contemplate something bad happening to their kids.

My message to you loud and clear in that case is: “Then don’t have that conversation!” That is to say – don’t present Child Trauma Cover as an optional extra; present it as an automatic inclusion which is a fantastic benefit and cheap as chips! This way all eligible children will be covered.

Why is Child Trauma Cover so important? When it first became available, I thought that it would be a good idea because, in the event of claim, the money could be very handy to cover medical costs in the event of a child’s serious illness or accident – and indeed this could well be the case. But it was only sometime later, as a result of the real-life experience of another adviser who I knew quite well, that I realised what the most important benefit of Child Trauma Cover typically was.

If you ask any doctor they will tell you that, in the event of a child suffering a major illness or injury, then by far and away the biggest facilitator and accelerator of the child’s recovery will be their ability to spend time with both parents, and the payment of a lump sum would therefore allow the breadwinner to take time off work as unpaid leave in order to spend that time with their child. This becomes especially important in this day and age when “compassionate leave” would probably be a long lunch. Of course, the lump sum could also be necessary to cover medical expenses.

This potential benefit becomes a total ‘no brainer’ when you consider that the cost of say $100,000 of Child Trauma Cover is approximately $120 per annum! In addition to this, Child Trauma Cover is convertible … at age 18 with no underwriting, which therefore creates an easy transition to long term Adult Trauma Cover. So why not make the Child Trauma Cover $200,000 for less than $5 a week?!

Hopefully you can now see why Child Trauma Cover should be an automatic inclusion on the parent’s adult policy, but consider also the benefit to you of pursuing this practice – quite apart from some extra revenue in your pocket, if you were to write 2 average personal protection packages a week with 2 eligible children per package, then you would have 100 guaranteed new clients per annum coming on board any time between two and sixteen years’ time, thereby creating a guaranteed new client pipeline simply as a result of doing the right thing by your 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.

…And if anyone would like to receive Chris Unwin’s Chrisisms on a fortnightly basis, just email him with your details, including the state in which you reside.

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.

…And if anyone would like to receive Chris Unwin’s Chrisisms on a fortnightly basis, just email him with your details, including the state in which you reside.

Contact or follow the author: Telephone: +61 417 281 034 | Website | Email | LinkedIn