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‘Income protection needs big overhaul’

Income protection needs urgent simplification, says industry consultancy Le Beau Visage.

Its research has found that IP is grossly undersold, compared with critical-illness cover and mortgage payment protection insurance, due to its perceived complexity.

The survey, conducted with CWC Research and sponsored by Munich Re, shows that CI and MPPI outsell IP by six times.

However, Department for Work and Pensions statistics show that 58 per cent of long-term disability claims are for reasons not covered by CI or MPPI, such as stress and musculo-skeletal disorders.

Le Beau Visage says these claims could be covered by IP, which indicates that IFAs might not be giving best advice on protection cover.

Munich Re proposes that IP sales could be simplified by standardising products, to enable a faster comparison of offerings, and reducing the time taken to complete sales.

Le Beau Visage and CWC believe it would be easier to change IP than either MPPI or CI and warn there is a risk of misselling if no change occurs.

Le Beau Visage director Peter le Beau says: “We have been voices crying in the wilderness on this issue.

“As an industry, we have been talking for years about the reasons why IP has failed to live up to its potential. Now we know what action needs to be taken and we must take it.”

Chadborn Baker & Kearle principal Peter Chadborn says: “I think they are absolutely right. There are so many variations of IP and many clients do not know the first thing about it, even basics like occupational definitions.

“ASU is a bolt-on and it needs to be made clear that this is not income protection. It is sometimes stacked up as a quick sell and it is not a quick sell, it is a complica- ted product.”

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