myi: How do Holloway Societies differ from other financial services organisations?
Holloway Societies focus purely on providing income protection policies for people who cannot work due to accident or sickness.
The ethos of a Holloway society is to provide income protection to everybody regardless of occupation, gender or whether or not someone is a smoker – something that has been unique in the market.
Many Holloway policies also include an investment element so each policy holder effectively becomes a shareholder in the Holloway society from which they got their policy.
If someone includes the investment element in their policy a certain amount of what they pay on their policy each month goes into an investment ‘pot’ which they get back at maturity together with a proportion of the profits of the society.
myi: How long have Holloway Societies been around?
Holloway Friendly is the original Holloway income protection society founded 130 years ago in 1880 by the MP for Stroud, George Holloway and it was the first organisation to offer income and disability insurance in the UK.
The number of working people without income protection is reported to be more than 85% now, can you see this percentage increasing or decreasing?
Economic conditions continue to put significant pressure on household expenditure resulting in a number of policies being cancelled or suspended.
However, where we see a real difference is in those consumers who have a strong relationship with their financial adviser, as the adviser can find clients policies which will provide them with essential protection but which will also fit within their household budget.
Longer term I believe that the level of income protection will increase for a number of reasons: those from the ‘squeezed middle’ will start to recognise the significant financial shock they experience when they cannot work, counteracting the current perception that the state will pay.
Whilst some middle income families perceive paying for income protection as unfair as they may believe that by taking responsibility and protecting themselves they are paying twice, I think they will come to the conclusion that it is better to do that than take the risk that they may have to live on an income of as little as £50-£70 per week.
Looking ahead, I think the growth of the welfare budget has to be reduced.
I think therefore that the government will be asking those that can afford to, or who have the highest requirements for IP, to take responsibility for protecting themselves – this could then be incentivised with some form of tax rebate on each policy as used to happen with Life Assurance Premium Relief which was abolished back in the 1980s.
myi: What opportunities are there for financial advisers?
There are roughly seven million people in the UK who both need and can afford income protection so there is a huge sales opportunity out there.
However few clients know that Employment Support Allowance from the government starts off at between £51 and £65 a week depending on age and dependents; after 16 weeks it averages at about £70 per week, but if your client has more than £16,000 in savings they receive nothing.
This presents a huge opportunity for financial advisers with clients who couldn’t afford to live on that little and who can afford to take out a policy.
I know of no-one that wakes up in the morning with the first thought being the purchase of Income Protection.
Without Financial Advisers discussing these issues with their clients, highlighting the risks of relying on the state and helping their clients to visualise their personal situation without income, when would most people even think about this?
Protection may not be sexy but it is necessary and it presents a huge opportunity for advisers.
myi: Where do you see the future of the market going?
I see a future developing of specialist products in smaller markets for example, the highest risk occupations which are not currently covered could be provided with cover for a limited period of time; so somebody in a specialist occupation such as a diver, for example, whose injury means they will not be able to work in that job again, could get cover for three years to enable them retrain so that they could enter a new profession.
I also think there will be a move towards event specific policies with guaranteed benefits aimed towards those that may not look for IP for their income, so instead of a policy being fixed on someone’s personal income it’s fixed on a single aspect that needs cover such as a child’s school fees of £10,000 for eight years.
Future policies may even flip the original ‘Holloway’ concept of providing income protection with a savings plan on its head perhaps evolving into a savings plan with IP to provide payments to maturity.
