Cashflow modelling enabling the protection conversation

1 June 2021
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Cashflow modelling enabling the protection conversation

1 June 2021

Rob Tedder
Rob Tedder
Client Cashflow Solutions Manager

Over recent months, there’s been plenty of opportunity and reason for clients to reflect on their own mortality and the security of their household finances. It’s perhaps no surprise, therefore, that protection sales have risen during the pandemic.

Despite an upturn in sales, the protection gap in the UK remains significant. A 2019 YouGov/Aviva study discovered that nearly half of families with children under the age of four don’t have life insurance. Separate Aviva research found that more than 40% of mortgage holders have no life insurance.

A winding down of the job furlough scheme and slower than expected growth in some sectors will add to the number looking for work. A recent poll by the Bank of England predicted that 11% of the workforce will be out of a job before the end of this year, up sharply from April’s official unemployment rate of 3.9%. These are very scary statistics!

And, a 2018 Royal London report claimed 81% of homeowners have no income protection, despite the ABI stating that one million workers a year find themselves unable to work due to a serious illness or injury.

Making protection part of the conversation

Clients often don’t see the value of protection until it’s too late. It often takes someone to fall ill or to lose a loved one for them to understand the benefits of life and health insurance. That’s why we designed the intelliflo planning ‘protection wizard’ – to enable you to have these important conversations with clients during their review.

And it’s not just wealthy clients that benefit. There is a misconception that cashflow modelling is only for high net worth clients, and that it’s used simply to ensure that wealthy people can sustain their lifestyle in retirement.

We’ve seen increasing numbers of mortgage and protection advisers subscribing for intelliflo planning licences and using cashflow modelling to drive protection conversations. These advisers are searching for a tool that will enable them to facilitate discussions around death and illness with clients.

The power of visualising impact

Clients sometimes find it difficult to understand the potential consequences that death or illness could have on their household finances.

Also, many clients believe that their existing cover is sufficient. Perhaps they have Death in Service through their employer, or even a life insurance policy they have taken out themselves.

In many cases, a client’s existing protection simply isn’t enough. A good example would be the recent NHS Life Assurance Scheme, where the government promised £60,000 would be paid to families of NHS and social care workers who lost their lives to Covid-19 while working on the frontline. While this is a substantial amount, the truth is that it won’t be a big enough safety net for many families.

Mortgage and protection advisers and financial planners alike find that demonstrating the impact of death and ill health by using cashflow modelling can be hugely impactful.

The protection wizard built into intelliflo planning enables you to show clients a visual representation of how they would be affected should the worst happen. In black and white, you can show them the impact of death or illness on their household finances, and how severely their lifestyle would have to change.

Assessing the needs and calculating the cover

The protection wizard can show clients what it would take to ensure their assets never fall below ‘zero’ in their financial plan. You can also establish an exact amount for how much cover the client needs based on their salary, needs, and reasonable assumptions. You no longer have to pluck an amount of life cover out of the air when recommending a sum assured.

The wizard can also show the impact of protection being paid as a lump sum or income, so the client can ensure they receive the right capital injection at the right time.

Sitting down with a client and spending just a few minutes considering their protection needs and showing them in black and white what the issues are can be hugely powerful. It’s also an effective way of assessing their understanding and stimulating a discussion.

Even beyond the pandemic, financial planners still have a duty to families to challenge clients about their levels of protection. Using cashflow modelling as a way of doing this is increasingly popular with the planners we speak to.

The compliance benefits of using cashflow modelling for protection

As well as being a great tool for stimulating conversation and demonstrating the value of protection, cashflow modelling can also help with the compliance elements of recommending life and illness protection. It can help you to determine a specific sum assured, so your recommendation is more robust and demonstrates how you’ve directly addressed a client’s needs.

intelliflo planning can export the data and produce a concise and easy-to-understand report. So, regardless of whether or not your client proceeds with your recommendation. you can demonstrate that you have had a conversation about protection and have discussed the impact of death or illness on their plans.