Advisers have called on larger protection providers to do more to help workers in the growing gig economy.
The recent move by Aviva to offer an income protection product with no financial assessment or deductions at the claim stage has been well received by intermediaries as being of particular benefit to working people with fluctuating incomes.
But advisers say more needs to be done by some of the sector's biggest players to move with the times and adapt policy design to fit the working patterns of people who could be seen to need income protection most.
Despite support from the advice community, giants Royal London and Aegon told FTAdviser they have no plans to update their protection range for this potential customer group. Zurich and AIG would also not commit to changes.
While definitions of the term vary, the ‘gig economy’ generally refers to self-employed workers on short-term contracts.
A 2016 study by The Department of Business, Energy and Industrial Strategy estimated the size of the gig economy as ranging between the 800,000 workers on zero-hour or agency contracts to a maximum of five million people, including those who class themselves as self-employed.
Yet many of t
hese workers do not have access to the same level of support from income protection providers as those in permanent employment, due to their fluctuating incomes.
This is because insurers will often conduct a financial assessment when a claim is made, providing a percentage of the claimant’s income and making deductions if they are in receipt of state benefits.
Claimants often find it difficult to provide the necessary financial evidence, and insurers restrict the amount of benefit they will pay.
As a result, just 4 per cent of self-employed people have income protection compared to a national average of 11 per cent, with 42 per cent mistakenly believing that they’re not eligible for it, according to research by LV=.
Advisers said the smaller providers are much better at catering for gig economy workers than many of the larger firms.
Alan Lakey, partner at Hertforshire-based Highclere Financial Services, said: “If I wrote a letter to you at the outset saying if your income fluctuates and so policies will reduce [your payments], your chances of taking up the plan are diminished.
“The plan design is not fit for purpose. Income at the time should not have any relevance. Some insurers do that up to a certain figure.
“Lots of contract workers who will not fit might be on zero-hours contracts, and it is important to cover these people. They are the ones who are most at risk.”
Emma Thomson, life office relations director at Lifesearch, said: “These consumers have a real need for income protection, as they are typically worse off than their employed counterparts when it comes to sick pay and benefits.
“It’s been good to see firms such as The Exeter, British Friendly, LV and more recently Aviva offer products that better suit these workers’ needs, as their earnings can vary and it may be hard to prove regular income.