The environment income protection is sold into is changing fast. Lee Lovett sees promising signs this could be the start of the time when IP cover comes of age
With this backdrop, the recent initiatives by insurers to accept increasing numbers of applicants on an ‘own occupation’ definition must be welcomed. It will provide much needed confidence that the insurance will do what it is meant to should a claim arise.
Simple products and IP
One of the age old reasons given for low IP sales is the products are too complex. The government currently has a ‘Simple Products’ initiative which aims to give consumers a straightforward option for buying financial products.
The objective of an IP product is indeed simple; to provide a regular income if you are unable to work through sickness or injury (or words to that effect). If you take this in tandem with some simple marketing messages (e.g. who will pay your mortgage if you are off sick?) and package with an efficient sales process, then that is a great start.
Group cover and auto-enrolment
The solution to growing the IP market is not just based around individual markets. The group market is already the largest segment and has plenty of opportunity to expand. Add to this the long-term potential for group IP to be sold as an add on to auto enrolment pensions (à la Australia) and this segment of the market has great potential. GRiD is doing a great job of raising the profile of the group market and this will facilitate future expansion.
Welfare Reforms
These will continue to generate media coverage and improve public awareness. More importantly, the current government is committed to reducing the spend on benefits, which will further increase the need for private, or employer, provision. The government is committed to cutting costs and recognises the expertise already in the private sector, especially in claims management.
If this were combined with financial incentives to make personal provision (or disincentives for those that do not make provision) then this could result in fundamental changes to the market. Compulsion feels like a step too far, but a long-term goal of following the pensions auto enrolment opt-out model, linked with appropriate financial encouragement, might just work.
Recession
Despite all of the above, there is no doubting the UK is still in recession; so individuals’ disposable income is not increasing and employers typically do not have expanding employee benefit budgets. So we cannot expect a material increase in IP business any time soon. However, looking medium to long term the signs are promising and this could at last be the start of the time when IP cover comes of age. So, there is hope yet for IP to fulfill its promise.
Lee Lovett is head of business development, UK & Ireland life, at Munich Re
