Last month I explained why the growth in income protection sales is a good thing for consumers and the protection market overall, and urged more effort to accelerate that growth. My logic is the more claims made on a type of insurance, the more consumers will understand the risks it covers and the more they will buy it.
Income protection has more claims than any other policy type. So more income protection equals more consumer benefit and thus more engagement with what we do, which means good times for the protection market overall.
But there is a vital proviso to this: the resulting claims have to be swiftly and fairly settled so those benefiting from them feel positively about what has happened and not furious at delay or rejection. And given human nature’s focus on bad news, everyone has to be fairly treated. One shocking story will destroy the benefit of a thousand successes.
That said, I do not think we should wait until all things appear perfect before we encourage people to buy income protection. Their need is current and our present policies work very well but by their very nature income protection claims are more challenging to underwrite. That means insurers need to focus on those challenges and ensure that, despite them, honest consumers never end up feeling ripped off. That needs high and customer friendly claims service standards across the board, together with fairer policy terms and conditions.
Normally at this point in the argument one calls for leading insurers to get together and agree something. But as that never happens I have a simpler plan. Retailers should simply refuse to recommend insurers that do not have satisfactory codes of claim handling conduct. After all, it is our job to care for our customers and where else is that more important than at the point of claim?
The other key area retailers should use in selecting an income protection insurer is the treatment of those whose income varies and who can thus end up expecting greater payment than the insurer will actually provide when they come to claim. Several insurers, such as LV=, provide a useful payment guarantee but they do have limitations.
To avoid letting claimants down, the financial underwriting needs to either be done at outset and priced accordingly, or through an annual review process that proactively ensures clients regularly review cover levels in light of their actual income. Beyond that, in an era where self-employment is increasing hugely, new product development should focus on products for the very different needs of the self-employed.
We cannot wait for reform before we protect consumers but it needs to happen fast if our efforts are to avoid the risk of complaints growing in line with claims. In the interim, advisers must chose providers at least as much on their expectation of fair claims treatment as on price. And providers need to price in truly fair treatment of claimants and boast about it.
Tom Baigrie is chief executive of LifeSearch