The ‘suited’ definition exists for a range of reasons and generally covers occupations which have seen a large number of historic claims, such as teaching or the medical industry, which are both known for generating stress-related claims. In this situation primary school teachers, for example, could instead become lecturers, while surgeons could become consultants.
It also exists for something I have heard referred to as ‘the boss problem’, which is for people who are quite capable of working but cannot get on with their boss (or their colleagues). IP is not designed to pay out in these circumstances so if a client’s boss (rather than their physical ability to do their job) is causing the problem the policy might not be expected to pay out.
But these definitions are not the problem. The issues come with the myriad other definitions in use, which can be summarised as ‘list-based’ definitions, such as:
• Activities of daily work (ADW), or work tasks
• Activities of daily living (ADL)
• Functional Ability Tests (FAT)
These definitions, which should be avoided wherever possible, rely on a list of tasks the policyholder needs to be unable to do.
For example, the policy may list six tasks from which the claimant would need to be unable to carry out three. These could include walking unaided, climbing the stairs unaided, writing with a pen unaided, and so on. If you can’t walk, climb or write you are clearly in a very bad way.
It is estimated that around 20 per cent of all IP policies are written on one of these three definitions and while insurers will seek to offer the best definition possible, there may be times when specialist IP insurers should be considered instead.
Might there be consequences?
The Aviva move is to be welcomed and will no doubt be matched by other insurers in the future. However, advisers should take a quick look at an insurer’s declined list as well – the list of occupations which are automatically declined cover as this will no doubt increase as a consequence.
Typically such a list, which all insurers have, would include rock stars, opera singers, fighter pilots etc – extremely high risks where cover would either be provided by the employer or sought through less traditional routes.
You might not instinctively consider a singer or a guitar hero to be a high risk, but if they’re voice or their vocal range is damaged, or if they harm one finger and can’t play the guitar any more, they are no longer able to do their own job (regardless of any other lifestyle considerations which may be taken into account).
