National Friendly, like all insurers, are bound to manage risk prudently, and as such still decline or postpone a small proportion of our Income Protection applications
After reviewing the most common reasons for declining these cases and considering why many advisers never even start the application journey, we designed a product to fill a perceived gap. A product that would insure and meet the needs of these clients, while providing advisers with an income stream, and so the Accident Only Income Protection product was born.
An unexpected accident can create a fall in earnings, with well over half a million people a year reporting non-fatal workplace accidents*, so everyone is at risk.
But the options traditionally available for safeguarding against financial loss due to accidents haven't suited everyone, particularly younger clients and the self-employed – who tend to have time constraints and are more likely to be budget sensitive.
On one hand, there is personal accident cover, which pays out a lump sum. But it's rarely recommended by protection intermediaries due to unattractive pricing and highly restrictive small print.
At the other end is the Holy Grail of income protection, which pays a regular income to those unable to work because of long-term sickness or injury. Ideally, most people would have this. But in practice only around 6% do**, because premium costs can seem prohibitive, and the underwriting process is often time consuming and can exclude important cover elements.
Filling the gap
Intermediaries can boost sales by filling the middle ground and offering cover to those who historically couldn't access it, and National Friendly's Accident Only Income Protection can help with that opportunity.
It only pays an income if policyholders are unable to work due to impact injuries from accidents – and not for health reasons. It is therefore much more accessible and affordable when compared to standard income protection.
Gifford Clay, Head of Intermediary Sales at National Friendly, says "With the Accident Only Income Protection average monthly premium similar to signing up to a monthly Netflix subscription, it can be particularly attractive to those with limited budgets. It's also very easy to take out as there are no medical questions or underwriting requirement."
"As the application process only lasts around five minutes, advisers can avoid the common problem of clients saying they'll fill in the forms later as they don't have time. It can be done there and then," he explains.
How does it work?
Accident Only Income Protection allows clients to choose between a 1-, 2- and 5-year benefit period and a benefit amount of between £500 to £6,000 a month - up to a maximum of 70% of earnings (5-year benefit periods are subject to a maximum of £2,000 a month).
Claims payments start after an initial waiting period chosen by the client at outset, which can be 30, 60, 90, 180, or 365 days. Additionally, for less than £1 a week, policyholders can obtain additional fracture cover, which pays an immediate lump sum if they fracture a bone. This adds additional cover during the customer's deferment period for that added peace of mind.
A toolkit for the self-employed
The product also includes added-value features of particular interest to the self-employed who don't have company-funded sick pay and will be intent on avoiding the NHS waiting lists to get back to work as quickly as possible.
One of these is Friendly GP, a virtual GP service that offers 24/7 telephone consultations and video consultations for the policyholder and their immediate family and is accessible as soon as the policy starts. Another is a £1,500 a year rehabilitation benefit to help clients get back to work by accessing scans, tests, specialist consultations and other relevant treatments, with physiotherapy being our most used benefit to date.
As the self-employed often have fluctuating incomes, they can also gain from a market-leading benefit guarantee to provide reassurance if earnings go down after the policy starts.
With no underwriting, the product is suited to those likely to be excluded or subjected to premium loadings with standard income protection for having pre-existing medical conditions or perceived high-risk occupations.
But just the sheer time saved in applying can also make Accident Only Income Protection appeal to busy clients who don't have such issues.
Clay continues "When you need medical evidence for traditional income protection, one of the hindrances is that GP reports often involve 45-day turnaround times. And, if clients have to attend a medical test, it can put them off altogether."
"Additionally, the Friendly GP service, which can also be used immediately at inception by the policyholder and their family members, means people are not paying for something that just sits on the shelf until it's needed," he explains.
While National Friendly is not claiming that Accident Only Income Protection replaces income protection, it certainly does provide a valuable addition to any intermediary's toolkit.
SOURCES
*Labour Force Survey (2022/23).
** The Financial Conduct Authority's Financial Lives Survey (2022).
