The challenge for income protection continues. The current focus for most providers is currently on the legislative issues of Solvency II, RDR and gender neutral pricing. These issues are large and distracting from product development.
That said, income protection generally hasn't really benefited from development over recent years. What it needs is a good shake-up, not necessarily re-inventing the wheel but re-focussing on customer needs.
Advisers seem to have challenges with income protection which indicates that the product and process need some attention. The process has improved with the use of tele-underwriting which has made it shorter and arguably more efficient. At the risk of being controversial, reliance on adviser distribution which is reducing probably won't grow the market. Which means greater use of online.
Either way, the product has to be less complex. One aspect of the current product is the long-term nature of the benefit provision, which has effects on underwriting and pricing.
The consumer need on benefits can be assessed as short term and long term. Short term is really important to cover an immediate need. People may well recover from illness which means a long term benefit is not required, so why do we offer it with the associated cost and underwriting?
If long-term benefit is required, a consumer will have had the opportunity to adjust and adapt their financial situation. The conclusion here is to offer two levels of benefit.
The other thought is to offer an entry level product and up sell. This at least allows providers to reinforce the benefit value.
Finally, what about ignoring state benefits? It makes the proposition simpler and gets around the fact of trying to match benefits to a state system renowned for change. There must be many existing policies which don't integrate currently as evidence.
There is still a large market out there, let's grasp it.
Phil Veale is founder of Chiltern Consulting
