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Clients need to be told IP is not ‘toxic product’

Advisers and providers have admitted more work needs to be done to prevent income protection being tarred with its “toxic” association with payment protection insurance.

In a meeting held by the All-Party Parliamentary Group for insurance and financial services last week, chairman Jonathan Evans said income protection suffers from being confused with PPI.

He said: “It’s not that the product is toxic, but that’s the way the product is viewed amongst the public.

“All political parties are agreed the welfare state is going to contract and it’s therefore necessary we start to stimulate a proper participation market. Yet we are struggling to do that against this backdrop.”

Money Minder Financial Services managing director Ray Black agrees. He says: “There has to be more done to help people understand the difference between PPI and IP.

“Proper IP is clearly a different product, but it could do with some more positive press about how important it is.”

Basi & Basi Financial Planning managing director Michael Basi adds customers fear IP will not cover them as reliably as other products.

Basi says: “Customers look at it and think there’s lots of uncertainty and lots of clauses for things like how you define illness.

“Why isn’t there a product in the market that simply says that when a doctor signs them off, it will pay? Simpler products would probably be more successful.”

Insurers admit the wider benefits also need to be better understood. Aviva product propositions manager Jonathan Platts says: “We recognise there is still a long way to go to raise awareness of the full benefits of protection.”

“We believe it is the responsibility of insurers and advisers to inform and educate people, both on what the Government will and will not provide, and how insurance can help.”

Zurich group protection manager Nick Homer argues it is questionable whether protection is being highlight enough alongside mortgage sales.

He says: “It’s just not given the promotion it should be getting.”


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. Hooray for Jonathan Evans, and all those stalwarts still trying to get people the help they need when illness zaps income.

    I’ve grappled with the income protection problems from both sides: as a proposition designer and as a claimant on the wrong-side of a company well-famed for claim dodging (I found out later).

    So something drastic needs to change, but there are no easy answers.

    Certainly the tainting by the misuse of PPI has been a disaster. But even without that, IP has always been difficult.

    So yes, some truth in how it helps to raise awareness of how insurance can help…hooray for the 7 families campaign. But there are massive other issues too.

    Not least of which is beautifully put by Michael Basi: ““Why isn’t there a product in the market that simply says that when a doctor signs them off, it will pay? ” That’s what punters want, but don’t get.

    The industry (inc. FOS, ABI etc) describing IP say “It pays out if you are unable to work due to ill-health”
    But the truth for some claimants is “It pays out if you are unable to work due to ill-health – MAYBE. That’s if we are prepared to believe you haven’t fooled your doctors (who can’t be trusted anyway, as the patient’s advocate) and we can’t think of a non-existent job you could theoretically do instead….if only it was available to you (……sorry, this isn’t unemployment cover. Yes, awkward isn’t it, applying for jobs when you’re already signed off ill. Sorry this will be a disappointment to you.)” Only after several months resorting to referring to FOS and copying in the insurer, did I promptly hear back to say they had decided to pay the claim and would I retract my complaint to FOS (Glad to, as they thought it was about PPI! No wonder the public are confused.)

    It would be not so bad to think my case was a one-off exception. But reporting to my GP some of the astonishing reasons given me for declining the claim, the response was “Sigh. We see this time and time again.”

    But for all that, unfortunately the answer to Michael as to why there isn’t such a product is that nobody who needs such a product could afford it. At least, not without some other major changes. So radically restricting the benefit levels is part of that, as with short term IP products, for example. But that’s the tip of the iceberg.

    Reducing the nightmare elements of the application process for advisers, clawing more time for the protection bit back out of clunky MMR processes, finding ways to nip health problems in the bud, getting tax relief on premiums, adding IP as an optional extra to auto-enrolment, tying in opportunistic rainy day savings elements to the insurance cover…..until we see more of stuff like this rolling out, then Group Cover for permanent employees is the best hope for reaching a reasonable volume of coverage. Hard luck for the rest of us.

  2. IP or PHI is too complicated but in some cases this is necessary because of the nature of the occupation and the risk to the insurer. The risk in going the other way is that clients pay a higher premium for those who represent a risk or those whose lifestyle is such that the likelihood of a claim is greater.
    As for the idea of a GP signing off someone who is ill – the relationship between a GP and patient is such that I would question whether the decision should be that of the client’s GP. Already GPs cannot send a patient for a whole range of treatments without firstly getting approval from an independent panel – apart from not trusting doctors to spend money wisely this does at least remove the responsibility of a GP for taking the difficult decision to refuse a particular course of treatment and the inevitable ire of the patient.
    Ill health and IP requires much more than tinkering with the product but an acceptance by politicians of a few unpalatable truths that we need better education and incentives for people to look after themselves.

  3. @ Ruth
    The trouble is, the first rule of any insurance company is “avoid paying any claim” and me being very cynical believes that’s why they make these plans very complicated not only for the consumer but us as well.
    This problem lays squarely at the ABI’s door

  4. Ha! @DH, if even an IFAs think that, no wonder Joe public does (and IFA efforts in that direction seem to be trending down, not just because of RDR). Any direct experience you wouldn’t mind sharing with me privately? Am working to try to improve things. (Can be reached via LinkedIn…Ruth V Gilbert)

    But from my own experiences, I wouldn’t totally agree, as I think there’s a range of approaches. My IP insurer seemed to be (in 2010) at the don’t-pay-if-we-can-possibly-avoid-it-end and eg, for PMI, Western Provident Association has always been at the other end. But then they’re a not-for-profit company. Similarly sticking to IP, friendly socieities + mutuals have tended to have better records. Others have improved their stats in the last couple of years…but who knows how much of that is due to “pre-screening” i.e. ensuring the initial contact with the claims team doesn’t turn into a claim.
    Overall, I think the balance has been a bit too skewed towards protecting the claims ratio, but the tide is turning as insurers realise they can’t resist the pressure of claims coming more into the spot-light of public knowledge.

    @Sam C:
    Agreed, impossible to avoid complication due to the nature of the beast. Simplifying one bit makes other bits trickier.
    And yes, just a GP sign-off without additional criteria in practice not workable on its own…just using the short-hand of Michael’s “Dr’s sign-off” to represent the public’s starting point. So in reality “doctor” more usually would have to be “consultant”…and the again the complications sneak in again to determine sensible exceptions.

    But as you mention “occupation”, there is one glaring inequity of IP we need to see ended either by ending the practice or at least being transparent about it. We all know about the problems of the “ADLs/ADWs” basis. But I’ve found few know about the problem with the “own occupation” gold standard. That term and the assertion that “the product pays if you can’t work due to ill-health” leads not just customers, but also IFAs and insurer marketing departments, to believe it means want people really need and expect – OWN JOB. Ie when ill-health stops you doing the job you’ve got. Whereas it’s still the case that some claims can be declined on the basis that whilst you can’t do your particular role with your particular employer, the insurer thinks you’re well enough to do another job which would be described as the same occupation. Eg carrying on being an accountant, but at another firm. Or same firm, different department / manager. Conveniently ignoring that your chance of getting such a role, if a vacancy is open to you, is near zero while unwell. (No, I’m not getting confused with “own/suited” as non-claims people usually say when I mention it.)

    There, feel better for getting that out there!

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