I write with regret that the income protection (IP) quality standard (QS) has been abandoned.
First, it is worth recapping on the concept. Originally, the IP Task Force White Paper proposed a "quality mark" (we now use the term "quality standard") for IP products.
Karin Lloyd and I carried out a feasibility study with four insurers to create a QS framework which would meet consumer needs and eliminate, as far as possible, consumer detriment issues. The four insurers that supported us were (in alphabetical order) Cirencester Friendly Society, Exeter Family Friendly, Friends Provident (now Friends Life) and HSBC. I would like to put on record my gratitude for their support.
Our ultimate aim was to deliver massive growth in this market.
To support our study, we interviewed a wide range of external stakeholders and explored their views on the past, present and future for income protection; their support for the concept of a QS; and the external environment that such a scheme could operate in. We also carried out detailed interviews with the four companies to flesh out what the QS might cover.
The study was a learning experience for all of us. At the outset, there was a concern that the QS could overlap with standards set by others, such as "star" markings for products. It soon became clear that our aspirations were much higher than anything attempted across the IP industry before. Rather than bells and whistles, we addressed vital consumer needs and detriment.
Our survey of external stakeholders showed considerable support for the project, but the regulators refused to engage while it remained in feasibility mode. We found this particularly irritating given their professed desire to be proactive in addressing consumer detriment.
Overall, we came up with five key themes for the QS: that the QS would need to go well beyond "lowest common denominator" consensus to have a real impact on consumer detriment; that IP should be easy to buy and sell; that people should know what they have bought (it does what it says on the tin); that it should be easy to claim on (and pay out what people expect to receive); and that it should be transparent (i.e. publication of how well it works).
I don't propose to go into detail about the elements of the QS - that would be unfair on the companies which funded the project. However, key points for me were: products should cover own occupation (and certainly not just activities of daily living (ADLs); no pressure sales (i.e. the standards that were applied to PPI by the regulator); no blanket exclusions but partial cover offered where specific exclusions are applied; guaranteed payouts (the end of over-insurance); no continuing obligation to disclose; and publication of claims stats, including what percentage are paid in full.
Why has the QS been dropped? After making our report, we decided that we needed to test out our findings with real consumers. HSBC kindly took this forward. While they found that consumers supported the concept, they also found that the QS, of itself, would not cause them to buy IP. On reflection, what we did was similar to what the ABI did on non-disclosure guidance. Consumers don't buy products because of it. But if they do buy them, they can have peace of mind.
So, what next? I hope that the work we carried out will have an impact on product innovation by the companies who took part. Otherwise, I guess the IPTF or ABI will need to consider if they can take forward any elements of the QS on an industry-wide basis. As for growing the market, that will depend on providers' own marketing and commitment to IP. There is no "magic bullet".
Richard Walsh is a director and fellow of SAMI Consulting, www.samiconsulting.co.uk
