So little TPD, for tiny sums

Yet, TPD is a classic for insurance: it is a rare occurrence that has a catastrophic effect on a person. It applies as much to individuals as families.

The scope for financial protection to help supporters, and the insured themselves, is huge. The ability to cushion a fall in living standards for a relatively low premium is arguably bigger than for any other insurance product.

If even you don’t like it much then clients will like it less. The role of TPD has been encroached on by trauma and income protection, and in comparison, you may be part of the majority of advisers that worry about whether TPD claims are being paid. Worryingly for insurers, but reassuring for clients, the news on the claims front is that more and more TPD claims are paid.

So total and permanent disablement insurance does still have a role, and I want you to consider it.

The cost to manage an initial trauma is much lower than the cost to manage a total and permanent disablement. But Trauma cover is added to policies, typically, for just $50,000 or $100,000 sum insured. Whereas the amount of sum insured required to cushion the average family is more like $350,000 to $600,000. That additional sum of cover can be bought cheaply: $500,000 is less than 80 cents a day for most insurers for a non-smoking male age 40.

If you only need $300,000 and you have already bought $100,000 in the Trauma policy, then the cost is about 55 cents a day.

Comments from our readers

On 3 August 2014 at 11:45 am Bob Smith said:

It's because a lot of Advisers do not believe in the product themselves, and as a result do not recommend TPD to their clients. I personally think it is a great product.

On 19 August 2014 at 8:56 am Mark Ogden said:

Skoda had a brilliant ad a few years back, a beautiful model seducing the audience until she says her name is Helga (sorry any Helga's reading this). Get over the name, she's gorgeous.
I believe the responsibility partly here lies with the product manufactures.
I had discussions with Product managers years ago explaining that I didn't want to sell TPD because it sucks. The name and reputation I meant. I would never buy it or sell it.
With the introduction of "own occupation" the opportunity was there to change the image of the product. Fantastic product I have truckloads myself.
Why not think of a new name? Nah "Lada own" will do. Unfortunately Insurers are not the best at naming their product. (Trauma Recovery...really?).
Oh let's add Mortgage Protection but you don't need a mortgage.
I really feel carriers have lost sight of the end users who we have to now explain, no it's not dodgy you have this product with no mortgage or rent. Don't worry what the label says.
And this TPD "own" is totally different to that TPD "modified" I am telling you is rubbish(substantiated of course).
I think Skoda had a really good point, but it's still a Skoda to many.

On 19 August 2014 at 10:33 am Bestadviser said:

Agree with a lot you say Mark - do you have a suggestion of an alternative name for TPD?
Not sure I agree entirely that it is the product manufacturers, we advisers must collectively share some blame too. Mortgage Protection with no mortgage? Seems to me this is driven by the wild rush to avoid ACC offsets for clients at any cost. As I understand it income protection/mortgage protection premiums are determined (reduced)taking into account that a proportion of disability cases will be paid by ACC and thus offset - no cost to the insurer. Our drive to avoid ACC sounds like the best thing for the client but in the long run it is bound to backfire. As insurers get less and less benefit from ACC the premiums will inevitably go up. We are essentially driving up premiums for something clients don't need and ultimately asking clients to pay more for income/mortgage protection (and thus have less to spend on other protection)to fund disability where ACC comes to the party anyway and there is no or limited need from their private insurance - sounds like double dipping to me and not sensible insurance principle. What does anyone else think?

So little TPD, for tiny sums

Getting clients to buy TPD can be a bit of a struggle. At least, to judge from the in-force premium statistics, at just $40 million premium out of more than $1.5 billion of in-force premium it is tiny.

Monday, July 28th 2014, 7:25PM 3 Comments

Comments from our readers

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