A further very significant recent trend has been the growth in popularity of IP plans offered by friendly societies. Indeed, according to Swiss Re’s Ron Wheatcroft, these have made up for a gap that would have been created by demand for traditional IP plans dropping by some 30% between 2006 and 2008. The big development has been the ability of several friendly societies to provide IP that is protection only – as opposed to old style Holloway Plans that include an investment element. Pioneer Friendly and – since this February – Holloway Friendly(see box) – now offer this format and Cirencester Friendly, which offers the ability to deselect the investment element from a Holloway Plan, effectively does so as well.
Mark Banfield, senior partner at AFP Partnership, an IFA based in Maidenhead in Berkshire, reports that around 70% of his firm’s business has been going towards Pioneer during recent months, while Henrietta Oxlade, an IFA with Central London based Bond Wealth Management, estimates the proportion from her firm to be around 40%.
Oxlade says: “Previously I did little business with Pioneer but now I consider it as an option in around half the cases I deal with. My self-employed clients find the day one cover very useful and the fact that all risks taken on get ‘own occupation’ cover is important. Having premiums that are initially cheaper and then rise with age is very attractive during these uncertain times when people are concerned primarily about the present and are not at all bothered about the prospect of future premium increases. Pioneer’s administration is also particularly good. They issue policies virtually overnight.”
For similar reasons, Diane Saunders, director of Leeds-based IFA Diane Saunders Financial Advisors, has found herself increasingly recommending Cirencester Friendly’s IP with the investment option deselected. This differs from Pioneer (which offers ‘own occupation’ and a level benefit structure throughout the policy term) in offering a range of benefit structures. The two most popular are own ‘occupation cover’ which reduces to 50% of the original benefit level after three years and ‘own occupation’ cover that switches to ‘any suited’ cover after 52 weeks.
Saunders says: “Like Pioneer, Cirencester has a very good niche product for people who are otherwise difficult to insure because it provides ‘own occupation’ cover and doesn’t rate on sex, occupation or smoking habits. I have recommended clients to Cirencester who are being charged under a quarter of the premium they would be charged by the major insurers. Although premiums are reviewable, applicants are given a strong indication as to the likely future costs and so they can decide if it will be affordable, which it nearly always will be. Cirencester is very easy to deal with, its systems are excellent and there is good access to underwriters for asking questions.”