Last time out I urged you to join the income protection bandwagon, but one should acknowledge the wagon is more milk float than juggernaut right now. It will take serious effort to turn our most needed product into a household standard like pet insurance, for example.
The right place to start that effort is to understand what is and what needs to be. That has just been brilliantly explained by Richard Walsh and Alan Woods for the Chartered Insurance Institute. Their Building Resilient Households report maps out the issue affecting a million people a year. No product developer could ask for a better starting point for a scoping exercise.
Of course, one could just demand the Treasury increase the reach of statutory sick pay to the growing army of the self-employed. But while the Department for Work and Pensions and the Department of Health have just published a green paper that gives us hope the industry and Government may at last be able to work together effectively, we can be sure it will be a long and uncertain process. Besides, there is no money in the state coffers, so expecting benefits to grow any time soon is silly.
In any event, for all but the poorest entitled to further state benefits, the £88 per week currently available hardly represents financial security. The only practical solution is to insure all or part of the risk.
As the Seven Families campaign showed, proper cover can help hugely. And it is available. In truth, though, until the protection industry decides there is money in what all agree is a good cause, income protection will remain a Cinderella in the shadow of her two relatively less useful sisters, life and critical illness cover.
A “radical step” forward
So what can we do? The Income Protection Task Force is seeking sponsors to engage with the Government, primarily to end the situation whereby people who claim on the insurance can be penalised by the universal credit system.
Providers should rally round this initiative, particularly since last week’s Autumn Statement made it clear the Government is not interested in encouraging insurance take-up with tax incentives.
Separately, we need to start improving the product, and I would like to suggest a radical step. The key to the business case for income protection is that it leads to many more claims, which keeps it relevant to consumers in a way life/critical illness simply will not in the future. But if claims are to be its selling point (as they are for any insurance product) they must be managed in a way that is beyond complaint.
That is a tall order. But the key to meeting it is to achieve consistency across all claims managers by defining a high and required standard of care, so the industry can demonstrate to all who doubt it that it treats its customers fairly.
These standards should become an accreditation any insurer must maintain if quality intermediaries are to recommend their product. It should include being caring, empathetic and efficient, but also require the products themselves facilitate a swift, no-nonsense claims assessment with no hoops to jump through and no clauses to minimise payments. I will get to work and tell you more next time.
Tom Baigrie is chief executive of LifeSearch