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MM leader: Getting income protection higher up the agenda

Despite plenty of good intentions and the strong likelihood that whatever is left of the welfare state will provide even less of a safety net in future, income protection sales continue to disappoint.

As Income Protection Task Force chairman Peter le Beau highlights in this week’s issue, the 120,000 IP policies sold each year are a tiny speck on a 20 million potential market highlighted in a recent Government-backed review.

The workplace will play a big role in any significant IP increase and there is plenty of lobbying about using auto-enrolment or tax incentives to encourage greater take-up.

Unum research suggests long-term illness costs businesses £3.1bn each year or £620,000 per annum for firms with over 500 employees. IP also offers the Government a chance to cut its welfare bill.

But while industry lobbyists are busy highlighting the fiscal and business benefits of IP, more needs to be done to convince the general public about the dangers of being uninsured and tackle confusion over its interaction with state benefits.

Step forward the IP Taskforce. Next year it will embark on a campaign to highlight the impact serious illness and disability can have on families, alongside working closely with the Money Advice Service to promote IP. It is also helping to create a simple questionnaire on whether IP is likely to affect an individual’s benefits.

It is obviously very difficult to engage people on matters they’d rather not think about.

Working with a range of charities, the IPTF will identify up to 10 families where the main breadwinner has suffered a serious illness or accident. It will then look to support the family for a year through a charitable donation from a trust funded by insurers and reinsurers.

TV production companies have shown an interest in making a series to highlight the impact of such payments. Getting this message out to a large TV audience would have a huge impact on the public’s awareness of the need to protect their incomes and the depressing outlook for those who don’t in the event that disaster strikes.

The IPTF speaks of breaking the “depressing link” between disability and poverty. Tax incentives or auto-enrolment could have a major role to play but such policies will only succeed if there is buy in and understanding from the public. The IPTF’s Family Support Initiative could be a big step in the right direction.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. The biggest incentive could be tax relief, but the main obstacle to that is that the government refuses even to consider it, despite the fact that the cost to the exchequer would be minuscule. The same goes for monthly premium LTC insurance plans. So nothing is likely to change.

  2. As well as Julian’s sensible offering I suggest that the entire industry needs a massive rethink regarding IP design.

    There are too many caveats and unnecessary design features which put off clients and advisers.

    1. Do we really need to restrict income to a percentage of pre-disability earnings. If claims management is sound then the incentive to return to work risk is minimised.

    2. Let’s get rid of things such as the need to advise of a change of occupation and the potential reduction in income if state benefits are paid

    3. Include waiver of premium automatically

    4. The most important factor will be in increasing the numbers of advisers talking to clients (or selling, as I am bound to say).

  3. To continue on from Alan’s point 4)…..to increase the number of advisers talking to clients about it instead of, or as a priority to critical illness cover.

    My personal opinion is that a default recommendation, especially mortgage related sales, should not be LIFE, CI, ASU as it appears that a lot of advisers go with, it should be LIFE, IP, CI, U.

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