More than a decade on from their introduction into the health and protection market, Harvey Jones asks what lies ahead for menu products
The concept of the menu protection policy was cooked up more than a decade ago in the unlikely setting of a Burger King fast food restaurant in Edinburgh.
The pubs had shut and Roger Edwards and Nigel Bradshaw of Scottish Provident were staring at the fast-food menu when inspiration struck.
“We noticed it was cheaper to buy a Whopper meal deal than order your burger, fries and fizzy drinks separately, and wondered whether the same principle could apply to protection,” Edwards says.
That late-night epiphany led to Scottish Provident’s Self Assurance plan, which combined life, income protection (IP) and critical illness (CI) in a single whopping deal. Four years later, it had gobbled up one-third of the protection market.
“We were lucky,” Edwards admits. “Setting up systems for menu products takes time, and we had a clear 18-months before the first competitor appeared.”
It has plenty of competitors now, including Edwards himself, who launched a rival plan at Bright Grey in 2003. AEGON Scottish Equitable, Friends Provident, Liverpool Victoria, AXA Life, Prudential and progress from Royal Liver have also been tucking into Scottish Provident’s share of the menu protection market.
“Ten years ago, menu products were a major innovation. Now they are thoroughly ingrained in the industry,” Edwards says. But have they lived up to their early promise?
Neil Coffey, spokesman for Friends Provident, says menu products have achieved what they set out to do.
“They were designed to aid holistic financial planning and simplify the process of applying for multiple benefits, because the customer only has to complete one application form and pay one set of policy fees, and that’s exactly what they’ve done,” says Coffey.
Friends Provident offers one of the widest-ranging menus on the market. Alongside staples such as life, IP and CI, it offers life of another, houseperson’s protection, pension contribution protection benefit and unemployment benefit, although Coffey does accept that you can have too much choice.
“It is widely acknowledged that IP is the most important cover for most people but it remains massively undersold, and menu plans haven’t been able to overcome this particular hurdle,” Coffey says.
Justin Harper, head of intermediary strategy at Liverpool Victoria, says many advisers find menu products overly complex.
“Yet we believe the theory behind menu products holds up, because many consumers would benefit from a range of plans to help reverse the ever-widening protection gap,” he says.
While many brokers and intermediaries gaze hungrily at the menu, they don’t always bite.
Julie Smith, research manager at intermediary firm AWD, agrees that it is easier to obtain quotes and write business if you choose all your protection from a single provider.
“Clients also appreciate the freedom to alter cover levels or add new types of cover as their needs change, often without further medical underwriting,” Smith says. “Plus they get discounts and a single policy fee, rather than a fee per product.”
But comparing plans can be tricky.
“Not all menu products offer the whole range of protection, which makes it difficult to compare them on a like-for-like basis. As all clients are different, it can be a bit like trying to put a square peg into a round hole,” Smith continues.