Let’s talk about “it”.
“It” is a long-term insurance product which has been around for years, although not many people actually buy it.
That could be because they do not want it or could be they just don’t know about it. The conundrum is those who need it are the least likely to be able to afford it. Those who can afford it are the least likely to see their need for it.
Not enough of those who could sell it do, and an even smaller subset buys it for themselves. Many in the industry say it is too complicated. Simplification was not possible within the rules set by Carol Sergeant without setting people up to mis-buy it – so that was never going to fly. It is pretty clear, and has been for a very long time, that in its simplest form it is provided by the employer.
According to a recent study, it was the biggest loser in terms of number of new sales in 2013 and the latest industry statistics confirm that sales of it have fallen even further in Q1 2014.
In Australia its distant cousin got in to a bit of mess, resulting in a lot of unexpected expense, in the process ending a few careers, which has not helped confidence in the UK.
Of the long-term insurance solutions offered by the market it is statistically the most likely to be claimed on and yet, as the statistics prove it is also the least popular product. It is the only product to have its own task force – although, given the statistics this has not seemed to have helped it (yet). It is the insurance industry’s solution for people who worry about not being able to work due to ill health or disability.
“It” is IP, or income protection.
Personally I have never bought IP, but that is my innate optimism shining through. I believe that, somehow, I would find a way to survive the financial impact of ill health or disability in a way I do not think my family could if I were to die before retirement.
And here is the point – at least I have thought about it and made a decision not to buy it. As an industry we are at our worst when we decide these things for customers (take PPI, as a case in point). Our job is to try to make as many people think consciously and deliberately about the financial risks they face and to also offer potential solutions.
If people think through the options for a) passing the risk off by buying insurance or b) carrying the risk themselves by either self-insuring (through savings or other assets) or by doing nothing and employing hope, then that should be good enough for us.
The Income Protection Task Force’s initiative, Seven Families, will help do that. It will not change the world by itself but it is a positive step forward and can only help. If managed well it will raise awareness, so that others too can decide what is best for them.
Richard Verdin is chief marketing officer, UK and Ireland at RGA