Fiona Murphy finds the individual income protection market is going ‘back to basics' to target consumers
Aviva’s policies are now treating those who work full-time and part-time the same.
Julie Higman, income protection product manager at Aviva, said: “A question in my mind was why would we treat people who work full-time and part-time differently? They still have income they want to protect. Let’s get away from making that difference. It’s regardless of work patterns, how many hours worked a week, there’s been a lot about Zero Hour Contracts in the media.
“Instead we’re looking at what the person would have earned in the 12 months prior to their claim. It’s going back to the basics of IP, protecting that income and how people could manage without that. Hopefully it’s a lot clearer for customers.”
Simple products
Insurers are incorporating a move to simplicity through redefining their policies, instead of sweeping product development.
Steve Wanstall, head of sales at British Friendly agreed: “I don’t think there’s been an awful lot of development in the individual IP market. I think firms are becoming more reliant on own occupation cover, that has been critical, as it avoids the complexity around suited occupation. Its development has been in terms of transparency around the likelihood of paying out, that for me, it’s that moment of truth, will it help consumers when they really need it?”
But what about the drive to creating a simple income replacement product, has this fallen by the wayside? The Sergeant Review had called for the industry to develop such as product in its final recommendations made back in March. At the time the ABI pledged to drive a simple income replacement product and has recently re-confirmed its commitment to the cause.
Peter Le Beau, chair of the Income Protection Task Force, says: “The drive to simple products has not been particularly dynamic. What it’s doing is starting focussing people on can we simplify the proposition we’ve got, can we create a product with less underwriting, less complicated wording and policy conditions.”
Meanwhile, both British Friendly and LV= launched simplified IP products in recent months.
Martin Sincup, protection product manager at LV=, explained the drivers behind the launch of its product, Sick Pay Insurance, which is a direct-to-consumer offering.
“We sell a lot of IP in the advised space but a big area where there’s not much penetration with IP is direct to customers. The reality is most consumers do not see financial advisers, but that is where the most IP is sold. In terms of designing the product, we thought of they key issues preventing IP from becoming a mass market product.
“It was all about making it an inclusive product, there are only five jobs we do not cover. It needed to be bought without advice, we needed to make it really simple, it’s impossible to be over-insured and we keep the literature really short” he added.
As LV=’s move to a mass-market proposition has shown, insurers are increasingly thinking about how to reach more consumers through a range of distribution channels.
Wanstall said: “The IP market is still in need of gathering pace. I recently gave a presentation to people, many of whom were buying homes through Help To Buy.
The concern for me when I spoke to people was they weren’t even given the option to buy or even discuss IP. Life insurance and CI were top of their list, where IP wasn’t. I think we need to think about the influences, whether it’s an employer, financial adviser or employer. I’ve come across people who haven’t been given the opportunity to buy.”
With most of the population unaware of IP, for Swiss Re’s Wheatcroft, the natural home for IP is policies being taken out on an individual basis through the workplace, rather than employers focusing on group schemes.
Meanwhile Le Beau said: “I would have thought we could start looking at selling it as much more of a mass-market product, means-tested benefit issues aside. I think this isn’t an issue for people earning above £30,000, they should definitely have it and anybody who has a mortgage and financial commitments and families, should have IP in that category. The Simple Products working party identified around 23.5million people and they identified 12-13 million families they thought could usefully take up some kind of simple IP product.”
To rectify such issues, the Income Protection Task Force is working on a campaign to try to gain greater levels of take-up from consumers, particularly those on lower incomes, who had been left behind by IP in the past.
As a starting point, it is working on a questionnaire to gauge whether IP is likely to affect benefits an individual may be entitled to.
The body is also engaging with a range of charities, to identify up to 10 families where the main breadwinner has suffered an illness or disability and can no longer work.
It will then look to support the family for a year through a charitable donation from a trust funded by insurers and reinsurers, which the body said has courted interest from TV production companies.
This is welcome news indeed and could go some way to spread more awareness over the need for consumers to consider IP. However, despite such creative ideas and some product development, the market needs a boost. Will a simple income replacement product be that driver? We shall see, hopefully, next year.
