So what can be done? Better awareness will certainly reduce the gap. The public either do not know the product exists or think they will be sufficiently looked after by the state. The Government needs to be honest about the limitations of state incapacity benefit. It is publicising the need for personal pension provision to supplement the state pension, so why not do the same with IP?
The Association of British Insurers could also do more to encourage members to promote the need for IP through individual ad campaigns, or even better, a joint one led by the ABI.
Providers need to improve, too. IP is often left behind when it comes to electronic processing, which is either not supported at all or has poorer functionality compared with life and critical-illness cover.
Providers also need to think how new products can appeal to a broader audience. Real Life Cover is one brilliant new option but there needs to be more innovation like it.
Non-take-up rates are high which wastes time for all and deters advisers. Underwriters need to proactively educate advisers about what business they want and do not want.
Underwriting for IP is naturally harsher than for other protection products and exclusions for health issues are common. The problem with exclusions is that although cover is reduced, the premium is not, which many clients feel is unfair and choose not to accept. When the exclusion is for the spine or mental illness, the client is getting an even poorer deal as these are common causes of claims.
One provider, Fortis, has taken the brave and very TCF step of reducing the premium if it imposes either of these exclusions, which appeals to clients and reduces NTU rates. All providers should follow suit.
But advisers also need to play their part and not go for the easy life-only sale. Once the need has been established, they then need to consider the array of options. It is not easy to find an affordable IP plan for a female HGV driver who smokes but is not impossible.
Pioneer is one provider which has done much to plug the gap for higher-risk clients who are not wanted by the mainstream providers. To find the best option for the customer, advisers need to get to grips with the health issues, the occupational risks and the dangerous hobbies at outset. They should speak to underwriters to gauge how these risks will be assessed, rather than hedging bets by deciding to multi-propose.
Underwriters need to help as much as possible, being open about how they will underwrite these clients and offering alternatives, such as discussing how lengthening a deferred period could improve the terms. This saves everyone time in the long run and improves the customer experience. Providers must involve their underwriters in the sales process, otherwise NTU rates will never improve. With improved training and support for advisers, IP sales should increase.
If we can all make headway in getting more clients to take out cover, more people will hear about someone who has benefited and will want a plan of their own. We need to stop talking about reducing the protection gap and take some real action.
Emma Thomson is head of life office relations at Lifesearch