View more on these topics

We must raise income protection standards

The signs for both the economy and the protection industry over the past two years have not been encouraging. Bureaucracy, government interference, lack of consumer engagement – these are criti-cisms that seem to apply across the whole of the economy.

Yet against a bleak backdrop of potentially damaging infla-tion and interest rate rises, increasing unemployment and slow consumer spending, the anecdotal evidence from advisers seems to be that business is not that bad.

The mantra that when times are bad, people look to protect what they have seems to be holding true. Maybe this is in part because good advice engages the consumer – desp-ite the products themselves being far from standard.

Explaining to a layman about occupation definitions can be a painful experience. It makes no sense to most people how, theoretically, a person can be a fitness instructor unable to ply their trade but not get a payout because technically they are fit enough to stack shelves at the local supermarket.

So runs the logic of an anyoccupation or activities of daily living policy. Income protection is the product that most people should consider first, yet the terms on which it is sometimes offered by insurers are less than perfect.

In particular, many manual workers are offered policies on a work-based definitions basis rather than own occupation. This is unfair. Exeter Family Friendly, for example, offers all their clients an own-occup-ation definition and as a result their policies are very popular. There will undoubtedly be the odd occupation where own occupation is not viable, such as a singer, but there seems no reason why the vast majority should not be included.

Cost, of course, is an issue because insurers will have to offer own-occupation policies at a higher premium. One solution would be to offer manual workers both ownoccupation and work-based definitions – then let them choose. More consumer choice is a good thing.
The problem with work-based definitions is that they are not as customer-friendly as own occupation.

Which brings us on to critical illness and permanent disability. This should only be offered on an own-occupation basis, plain and simple. So, to move income protection and critical illness forward, any occupation must go and workbased definitions should be limited to only the minimum of vocations that cannot be covered any other way. It would make these products a little bit easier for the consumer to understand. More consumers may even pin greater value on what they have. That is an outcome worth pursuing.

Matt Morris is a senior policy adviser at LifeSearch


News and expert analysis straight to your inbox

Sign up


There is one comment at the moment, we would love to hear your opinion too.

  1. Interesting – but too much choice can lead to even greater confusion, however I do feel it is about time that any occupation and ADW’s should go! Don’t forget that other Friendly Societies can also offer an own occupation definition of incapacity (without additional cost) for all classes and some, such as Wiltshire Friendly even offer own occupation for blue collar workers under their new Group IP Plans.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm