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Peter Le Beau: How we are looking to shake-up income protection

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There is a massive conundrum that sits defiantly as a challenge to the protection industry in the UK.

Why do we only sell about 120,000 individual income protection policies a year when the recent consultation paper on a simple income replacement product suggested that the market for such a product amounted to well over 20 million people? 

However you look at, it this is a mismatch that we have to do something about.

Next year the Income Protection Task Force hopes to change the perception of income protection in the UK forever. Our plan is ambitious, high-profile and designed to make everyone in employment aware of the likely consequences of becoming too ill to work.

We are launching the Familiy Support Initiative. Combining with a series of leading charities, we will identify a number of families where the breadwinner has suffered a serious illness or  accident. We will support them with a charitable donation, equivalent to a year’s salary for someone earning close to the national average, from a trust created by donations from leading providers and reinsurers.  

We want to look at the financial effects of that illness on the family, how they cope with the problems that beset them and to try to bring to a nationwide audience the awareness that major health problems can arise unexpectedly but that it is possible to break the depressing link between disability and poverty.

It is an attempt to help families in distress, to educate the British public about their financial  vulnerability in the event of the unthinkable happening and also to look at the way insurers and associated agencies can help people back to work after the trauma of a serious accident or health event.

The sort of medical problems we highlight will cover a wide range of illnesses from severe depression to cancer, heart problems, stroke and neurological diseases. We hope with sensitivity and compassion to underline how we can help – both initially and while disability continues – and to outline the key issue that the state cannot provide an adequate level of support .

TV production companies are showing an interest in making a series to highlight the impact of people struggling to make ends meet and the ways in which serious illness changes the lives not just of the sufferers but also of those around them. We will make extensive use of social media, blogs and regular reports to enable people to follow the families’ stories and express their concern.

The key focus of this campaign will be to underline the fact that disability can happen to anyone. This is the mantra of the American Council of Disability Awareness, a body funded by the US insurance industry that aims to educate the American public about disability risks.

The key focus of our campaign is similar but even bolder and we believe that it will dramatically increase people’s awareness of the need to think about the impact of serious health problems. 

When we first started speaking to chief executive officers in the protection industry they responded in two different ways.

Some were wildly enthusiastic, believing that this could be a unique way to get a key message across to employees. Others were a little taken aback but curious to see how such an approach might play out because it is a more overt approach than we have previously adopted in the industry. And therein lies the reason we want to do it.

For years income protection sales have been profoundly disappointing despite there being some very attractive group and individual products available. Only just over three million people in the UK have any sort of disability cover. And while this problem rumbles on, our charities are amazed that the industry does not seem to make greater efforts to sell cover that people so desperately need.

This year, Macmillan Cancer Care, a highly respected charity, will pay financial grants to well over 30,000 families – possibly more people than will receive individual disability claim payments this year.

There has been a dip in energy in many parts of the income protection market. The level of adviser knowledge of the product could be substantially higher in many places. The IP Task Force is looking at a three-pronged plan to tackle this.

We are producing an interactive publication, Signposts for Income Protection, in January to point out the strategic challenges the industry faces. One of these is the commonly held belief that buying income protection affects eligibility for means-tested benefits. This will be the subject of a detailed analysis, which we believe will lead to an easy-to-follow questionnaire that will make it clear to potential buyers whether IP is a suitable solution for them.

We have shared our thinking with the Money Advice Service and will work with them to increase public awareness of this product. And we will, of course, mount the Family Support Initiative – the campaign that I have already described.

In research that we are undertaking for the Syndicate, and in the recent Swiss Re Insurance Report, we are seeing a worrying low water mark in the level of trust that the public has in insurers. 

We can react to this in two ways. We can wring our hands and complain about the injustice of it all. Or we can attempt to interact with real people in an exercise that we believe will increase awareness, education and trust. 

The Family Support Initiative is a bold step but we contend it is the only way to persuade people that disability can happen to them but that the insurance industry can be a marvellous source of support if it does. 

Peter Le Beau is chair of the Income Protection Task Force 

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. One of the most important products for a client in my opinion, but one of the most difficult and time consuming to pit in place so historically human nature is to go for the low hanging fruit of investment and pension business followed by mortgages, term life and then CIC. What should be most important can easily get left to last due to sales weariness.

  2. Why bother? – IP is a useless product? Why?

    Most who want IP are self-employed, who wants to pay to cover 50% of their income?

    Answer is no one.

    Don’t waste your time on this until you have a good product – 100% of provable out goings can be covered (not income).

    ie Mr Smith is a builder, his out goings are £2,300 a month, that’s what he needs if he can’t work.

    It should be called – Outgoings Protection, until this product is unlinked from income clients wont by it and that’s why they don’t.

    Rubbish product.

  3. @woof – It’s a good product for the employed, but I take your point re the self employed and company directors, hence why our penetration as a firm has always been so low.
    Not a rubbish product, just like MPPI, right for some and not for others. PPI, rubbish product usually in my experience.

  4. @PH – It’s not fit for purpose, I sell lots of these products and the client (with my advice) under insures in most cases based on the IP 50% limits on income.

    I agree not as bad as others, rubbish in the context that I have to tell a client who needs £3000 a month he/she should have £1,500 a month …. oh and its £68.00 a month for the pleasure of giving you a product that will not do the job should you need it.

    As above, Mr Y can prove his out goings are X the provider covers X for Y. We’re all happy bunnies (well dogs)

    Lets not forget IP is the most profitable product for providers, high premiums and low claim.

  5. An excellent initiative Peter. Best of luck with it all.

    @Black Dog, based on an employed individual earning £50,000 per annum LV=, L&G and Exeter Family Friendly would cover an amount equivalent to 76%, 77% and 90% of their take home pay (L&G even moreso if you include the enhanced TPD option) . There are also at least a couple of providers who cover up to 70% of gross income, and several covering more than the 50% limit you mention.

    Surely providing some protection is better than nothing? I often explain to clients that maximum benefit levels are in place to ensure a client is not as well off (or even better off) whilst claiming on a plan than they would be when working. I’ve never had a client raise an issue with this when the understand the reasoning behind it.

    Maybe it’s the demographic of our clients which differ but I wholeheartedly believe that Income Protection is completely fit for purpose!

  6. In the main – Why would an employed person want IP?

    Why have we not a product that will cover all the clients out goings or income?

    I agree some is a start.

    Its no good moaning about poor sales if the product doesn’t do what the client wants.

    Bad product = poor sales.

  7. Black Dog, I was hoping someone else would step in and answer your questions as I fear I may come across as somewhat condescending, however, they haven’t so here goes……

    Why would an employed person want IP? How many companies do you know that actually offer Group IP schemes? I’ll wager it’s less than 10% so that means the vast majority of employees don’t have the benefit of long term sickness cover. THAT is why an employed person would want it, surely?

    Why is there no product which covers all outgoings? If the insurers offer this then were is the incentive for an employee to return to work? There isn’t one! So what would stop a client swinging the lead and trying to claim for as long as possible as there would be no financial benefit to returning to work?

    Again, I maintain my position that IP is completely fit for purpose, not only for ensuring a client is protected as well as possible but also in not exposing the insurer to unnecessary risks

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