A defining moment for Tower’s Protection Plan

Superior definitions gave Tower the edge over the competition in the hard-fought Disability Product category of the Money Management/Dexx&r Adviser Choice Risk Awards.

The three-tier definition of disability in Tower’s Income Protection Plan pushed its overall category weightings above that of runner-up AIG Disability Income — the category winner in 2003 and 2004 — and Asteron Income Protector.

Dexx&r director Mark Kachor says Tower’s client offer of three definitions — income, duties and hours — gave its product “very close to the maximum” in definition weightings. “Advisers tend to give a pretty high weighting to definitions and consequently Tower, as the only product to offer clients a maximum choice of definitions, scored very highly here.”

The strategy has its detractors in the marketplace, Kachor says, but Tower is “is effectively challenging the notion that there’s a lot of difference between the three definitions”. He added that Tower’s category triumph was also due to the success it has achieved in balancing its price against its features and definitions.

“Essentially, Tower has deliberately set out to have a market leading product at its price point, and it has succeeded admirably in this objective.”

Kachor said AIG, as category winner in 2003 and 2004, “needed no explanation of its weightings strength across price, features and definitions”. He said third-placed Asteron has a policy of building in a lot of features, making it very strong on features, but this tended to “disadvantage its weightings at the point of price”.

Asteron also “offers clients a choice of definition, but only two, and therefore its weightings were not as high as that of Tower in the definition stakes”.

Tower’s head of risk products and strategic marketing Michael Downey agrees a “balance between competitive features and competitive pricing” is one of the Income Protection Plan’s primary strengths.

“Advisers want to have a good contract, with good benefits and features, but they’re also now starting to be much more focused on sustainable pricing.”

The product was launched in March last year and then relaunched again in April this year with significant upgrades, based on feedback from advisers since the 2004 launch.

Tower has now gone four years without increasing its yearly step premiums for income protection, and advisers are “starting to appreciate that”, Downey says. “Advisers went through a cycle there where income protection rates were going up from anywhere between 20 to 100 per cent, and probably even higher in some cases.”

He says a “lot of advisers” were also partial to Tower’s “unique income protection features, including our three-tier definition of total disability.

“By contrast with most of our competitors, which only offer a duties-based definition, our clients can actually choose which of three definitions they would like to be assessed on.”

Tower also offers a Disability-plus option, which Downey says pays out up to a total of 135 per cent of a client’s income where the client is severely disabled to the extent they cannot undertake two of the five activities of daily living.

In addition, its Retirement Protection option gives clients cover for up to 85 per cent of their salary, 10 per cent more than the industry standard. “Most of our competitors insure for 75 per cent of a client’s income, which means we are effectively enabling them to put 10 per cent of their income to super,” Downey said.

Tower also offers a plus-contract and a standard contract in income protection, with the standard contract offering a “ lot of the specific injuries and illness type benefits that competitors’ standard contracts do not”.