However, with the market moving towards ever closer to own occupation cover for everyone, one consequence could be that fewer people are insurable, at least with the mainstream providers, including those who do not have an occupation.
Likewise a further consequence could be price. It is possible, although certainly not definite, that we may see prices increase in future as a result of more people having better cover, although this is arguably a fair price to pay.
Friendly Societies
Many of the friendly societies specialise in IP and most already offer the own occupation definition for all policies. Firms such as British Friendly, Exeter Family Friendly, Holloway, Cirencester and more may at first seem more expensive, however the level of cover provided, especially the existence of own occupation cover, can often be much better than traditional insurers.
The friendly societies are a bit different, of course. While they generally offer ‘own occupation’ to all applicants (subject to the declined list), their pricing does not vary by occupation or smoking and rates are often age-related, which means they are fixed to increase each year in line with age.
Friendly societies are not the only insurers to primarily offer own occupation cover. As well as Bright Grey and Scottish Provident and Aviva mentioned above, PruProtect offers own occupation for all policies for at least the first year of a claim.
Does it pay out?
Many IP providers now regularly publish their annual claims figures and according to the ABI 92% of all IP claims were paid successfully in 2012. Claims are declined for two reasons, namely not meeting the definition or non-disclosure
The ombudsman rule 4.16 states their long-standing approach to complaints about non-disclosure is a three-stage one:
• Was there a clear question, and was it answered incorrectly?
• Was the insurer induced?
• What kind of non-disclosure was it?
In 2012 40 per cent of health insurance complaints, which includes protection, were upheld.
All types of insurance will have issues with declined claims at some stage, however, the higher the number of own occupation policies in force the fewer rejected claims the market will see.
Short-term cover: STIP
Another trend in the market is short-term cover. These are less expensive products which provide cover until retirement age, but only pay claims for a limited period such as one, two or five years.
Most insurers have short-term options and while the cover is clearly not as comprehensive as a full IP plan, the option can provide significant savings and act as a more attractive introductory recommendation.
