Since Lifesearch reinvigorated the debate over what defines activities of daily living last month, there has been a lot of discussion about the use of ADL as an occupation definition for income protection and critical illness. The Specialist Protection Adviser forum on LinkedIn received its longest thread on the issue and the debate has continued in the pages of trade media.
Is ADL an anachronism? If not, why do some advisers feel it is better to choose a reviewable own-occupation definition than a guaranteed ADL policy? The problem with work-based definitions is that they are not as customer-friendly as own-occupation, yet there seems to be no real reason why all insurers cannot offer own-occupation.
Cost is an issue because insurers will have to offer own-occupation policies at a higher premium. But an own-occupation option could be priced into a policy and, if it is too expensive, advisers have the option to reduce the cover or term for their client.
A solution for insurers to help advisers avoid this conflict would be to offer manual workers both own-occupation and work-based definitions and let them choose, with the help of their adviser, which one is right for them. After all, is there such a thing as too much choice?
Some say it adds to the confusion but IP is not sold on its simplicity and if all, instead of just a few, insurers offer own occupation, surely that would make things more standardised and not more complex.
The retreat of the welfare state makes it more important than ever that we get the message out that a personal protection policy is vital and that we back this up with high quality products that pay out instead of creating a succession of negative headlines.
The welfare state cannot be relied on to deliver anything other than the minimum of safety nets. Consumers do not realise their standard of living and repayment on debt, like a mortgage, would be difficult – if not impossible – to maintain if welfare payments were solely relied upon.
If the industry is going to offer up a viable solution, we need to make sure it will do what it says on the tin. Own-occupation definitions from all providers on critical illness and IP policies is a good solution.
You could say this is being a little harsh on ADL because something is better than nothing, as long as it is correctly advised and right for the client. This is true but there also seems little reason for all insurers not to offer the adviser/client the option of the gold standard of own-occupation.
Matt Morris is senior policy adviser at Lifesearch