Providers should shield protection clients from inflation

Thu, 13 Mar 2008

Advisers and their clients are being urged to consider the impact of inflation when recommending a protection policy.

According to progress from Royal Liver, providers that offer ‘escalation’ options, which allow consumers to increase the amount of benefit every year as inflation increases, should reconsider the way they in which they calculate premiums and offer ‘pay as you go’ terms instead.

Progress says that consumers tend to think in today’s monetary terms, when in fact protection claims can happen many years after they arranged the cover .

"A client will cover their mortgage but people forget how much inflation affects day to day prices," says Mike Farrell, head of IFA sales and marketing at progress from Royal Liver.

At present, providers employ several methods of calculating escalating premiums, which means the total price paid over the term of a plan can vary between providers. However, progress says its method, dubbed ‘pay as you go’ and available on both term assurance and critical illness cover, is the fairest way of calculating premiums.
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