The FCA has already warned of potential poor outcomes for consumers because of practices in the industry – for example the relative complexity of protection products compared to other insurance products, which makes it harder for consumers to understand whether they are good value or not.
Such warnings were clear in the regulator’s 86-page sector review, published in February.
Most recently, the FCA issued a warning that insurers may not be swift to pay out on coronavirus-related business claims.
While trade bodies moved quickly to allay such fears stating, as the Association of British Insurers has done, that “members are committed to swift payment of valid claims and interim payments to their customers”, it has left advisers feeling that, if the regulator is concerned, they and their clients should also be worried.
For example, broker Mactavish has called for an independent review process to monitor how insurers are dealing with coronavirus-related claims.
So what have insurers been doing to allay concerns?
According to ActiveQuote, the comparison site for protection insurance, income protection providers have been swift to update their terms for vulnerable policyholders. They have also sought to reduce costs on their own businesses by furloughing employees at “unprecedented” levels.
Meanwhile, insurers are accepting new applicants, including for prospective clients who have been furloughed by their own employers, and for accident and sickness policies, as well as introducing payment holidays and premium breaks for existing policyholders.
Some have also reworked their processes to deal with the physical restrictions of the lockdown. For example, L&G has provided an alternative digital solution so advisers can place their clients' policies in a trust online, without the needing a witness signature.
Rod Jones, head of partnerships at ActiveQuote, said: “We have found the current situation has seen more people than ever turning their attention to the benefits of having income protection in place, regardless of their employment status.”
As a result, income protection providers have not closed their doors, despite the potential for huge claims coming in over the next 24 months.
Getting cover
Getting cover – or increasing it – has historically been convoluted, involving GP reports, paper trails and often lengthy delays as a result.
But with most insurance providers having increased their technological prowess over the past decade, processing times have reduced to a matter of hours in some cases, rather than days.
And with people in lockdown, it is unfair to expect GPs to be signing off medical reports or carrying out a medical screen.
This is why insurers such as LV have increased non-medical limits by 10 per cent for income protection, personal sick pay and critical illness cover.
That means the amount of cover policyholders can apply for before needing a further GP report, tele-interview or medical screening will rise by 10 per cent.
The insurer also extended its current practices to get customers covered without medical evidence exams and reports.
Kathryn Knowles, managing director of Cura Financial, told FTAdviser: “I’m pleased to see that so many insurers are actively taking the stance to come up with alternative solutions.
“Most insurers have taken the view that now is not the time to go backwards in improving access to insurance.”
Other insurers have also focused on improving automated processing to help those applying within a lockdown environment.
For example, British Friendly made three changes to its underwriting processes in order to help advisers put clients on-risk quicker. These are:
• Withdrawal of non-medical limits.
• Introduction of ‘Little T’ tele-interviewing.
• Introduction of virtual screenings.
Tom Conner, director at Drewberry Wealth Management, said: “All three changes are very positive for advisers and our clients and the withdrawal of non-medical limits in particular is a market-leading initiative that will be a big help.
“The current environment is a challenging time, and any help to get clients to apply and go on-risk quicker is very welcome.”
Claims payouts
Having made it easier to apply for insurance, how are mutuals doing when it comes to paying out on claims?
Speaking on the news that mutuals providing income protection paid out £26m in claims to nearly 7,500 policyholders in 2019, Martin Shaw, chief executive of the Association of Financial Mutuals, said members were committed to paying claims in 2020.
He said: “The uncertainty caused by Covid-19 has made people more aware than ever before about the impact of being unwell and unable to work.
“These results are testament to AFM members’ commitment to paying claims whenever possible and demonstrate how they are working hard to make income protection accessible and easier to make a claim on.”
Cost
Further concerns have been expressed by regulators and industry watchdogs over the cost of premiums, with some industry commentators worried that the call on insurers’ cash in the form of mass claims might result in a need to raise premiums on new and existing customers.
However, some providers have moved to allay such concerns, either by expressing their intention to freeze any planned premium increases or, as in the case of LV, introducing payment breaks for qualifying existing members with LV protection policies.
According to Debbie Kennedy, protection director at LV, protection ought to be about more than simply paying out on a claim.
She said: “There is a strong link between financial and mental health and vulnerability, and introducing the option of a payment break during these particularly uncertain times means we can offer more support and reassurance when members are at their most vulnerable.”
Other insurers without shareholders to placate have made commitments of their own. Friendly society Health Shield has announced it will pass any unintended profit arising as a result of Covid-19 back to its clients and members.
This could take the form of a rebate, future premium decreases, or benefit and service enhancements.
Courtney Marsh, chief executive of Health Shield, said: “While it’s impossible to predict the future impact of Covid-19 right now, we want to let our members, clients and broker partners know that we have their interests squarely in mind.
“Consequently – and in line with our mutual society ethos – we’ll ensure that any assessed, exceptional financial benefit arising as a result of the pandemic will be passed back to customers.”
Similarly, insurer WPA has written to retail and small and medium-sized enterprise customers, informing them of a rebate of approximately 40 per cent of a monthly premium, rounded to the nearest £5.
In a statement, WPA said: “Once the coronavirus abates, we expect this will create a large increase in demand for private healthcare and we will need to take into account the cost of these expected claims in determining any further rebates.”
Support services
Moreover, protection brokers and providers have sought to promote the advantages of the additional support services attached to income protection and health policies.
For example, Health Shield is now allowing members to claim for specialist consultations carried out by video call, where individuals are referred by their GP or the provider’s GP Anytime service.
The provider says it wants to ensure that care pathway support continues.
While people are in lockdown and unable to access the gym or other wellbeing groups, providers such as Vitality have launched campaigns to support both members and advisers.
The campaign features Vitality ambassadors such as Olympian Jessica Ennis-Hill, rugby players Jonny Wilkinson and Maro Itoje, and paralympic swimmer Ellie Simmonds.
The campaign sees them showing viewers their lives in lockdown, sharing their own favourite recipes, workouts, and personal insight into how they are coping with life at home, in a bid to help others do the same.
This comes alongside webinars for advisers to help them support their clients with any issues they may be facing.
Neville Koopowitz, chief executive of Vitality, said: “We wanted to make sure we could offer support to advisers that goes beyond that traditionally available.
“We have also recognised that our life at home is significantly different and some people, including advisers, may be finding it hard to prioritise physical activity or time to look after their mental health.”
He said it was important for insurers to help people look after themselves, while having the safety net that insurance products can provide at this time.
Simoney Kyriakou is editor of Financial Adviser
