Auto-enrol to cut cover gap

His suggestions come after a three-week tour of South-east Asia and Australia, where he met with leading protection experts to discover how the UK can learn from other countries to boost take-up.

Kirwan says Australia’s auto-enrolment into protection plans through compulsory pensions, where scheme trustees have an obligation to offer everybody at least £50,000 life and total permanent disability cover, could work well in the UK and suggests that 2018 would a good time to introduce a scheme.

He says: “I understand that there is going to be a formal review of personal accounts in 2018 and I think it would be then when we could potentially introduce this.”

However, Kirwan says one potential pitfall is that people enrolled in the schemes believe that the basic level of cover is enough.

He says: “Australia is trying to fix this problem by making the basic amount of cover vary with different age groups.”

The Association of British Insurers’ protection strategy committee is due to discuss the issues at its meeting next month.

Kirwan also suggests introducing tax relief on income protection in the same way as personal pensions, an incentive also used in Australia.

The ABI has revealed that it is revisiting its income protection statement of best practice next year.

The paper, which comes under the ABI life insurance selling code of practice, will be reassessed in 2010, five years on from its last review.

CBK principal Peter Chadborn says: “Auto-enrolment into protection products along-side personal accounts and tax relief on protection polices both sound like great ideas but in the current economic climate are unlikely to be put into place.

“The former is putting a lot of pressure on employers and the latter is putting pressure on the Government’s coffers.”