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