Naturally, people with dependants stand to receive more in benefits, but there is less certainty than ever whether particular individuals would qualify and how much they might receive. Having IP gives certainty and peace of mind.
Clients don't think it will pay out when they need to claim
Lack of confidence among consumers in the ability, or inclination, of insurers to pay claims is something that affects insurance products generally and is well documented, but not restricted to IP.
That it is cited by advisers as a problem in this context suggests that advisers themselves lack confidence in IP.
Advisers can tell people about the number of claims that are paid each year, the very low percentage that are actually turned down and the reasons why.
Advisers can point to the excellent work of the Seven Families initiative, which provides first-hand evidence of where IP can make a real difference to those who find themselves unable to work.
By doing so, they can demonstrate that IP is not simply about the insurance but also about the claims support and early interventions that can aid rehabilitation and get people back into work.
Figures from the Association of British Insurers (ABI) show that, in 2015, 91.2 per cent of claims were paid out and the average IP policy pay out was worth £40,000.
Financial underwriting is too complicated
The complexity of the financial underwriting associated with IP is a valid criticism and probably the underlying reason for advisers’ lack of confidence.
Proving that a self-employed person or a company director whose income may have a large dividend element has sufficient income to support their application can be onerous.
Financial underwriting at claim stage is more vexed if the client’s income has fluctuated adversely just prior to claim.
However, according to the Defaqto database, of the 45 IP plans on the market, six do not employ financial underwriting at all and 12 operate a benefit guarantee such that a basic pay-out is independent of financial underwriting at claim.
While some clients may be more difficult to underwrite, the majority of prospects will have straight forward PAYE income and there are many product options in the market to suit various client needs.
A need for confidence in the product
Given that 97 per cent of IP sales are through financial advisers, the key to improving sales lies in the intermediated channel delivering quality protection advice.
It is therefore vital that advisers are confident in the product and strong advocates for it, building upon the good work evident in the last two years’ improved results.
