Income Protection  

How income protection has 'held its value'

  • Explain impact of coronavirus on income protection
  • Explain the value of income protection
  • Explain the value of deferred periods
CPD
Approx.30min
How income protection has 'held its value'

In May, the Association of British Insurers (ABI) and Group Risk Development (GRiD) reported that 98.3  per cent of protection claims were paid in 2019, the highest percentage of claims paid on record. 

This is an important message to the industry because it demonstrates that advances in underwriting processes in recent years, including tele-underwriting and sophisticated online application systems, has reduced the number of declined claims due to non-disclosure.

Whether this a good message for consumers is a debatable point.

Many people would hold that once they are accepted for insurance, their claim should be paid – the basis of the argument for non-contestability clauses, prevalent in the US.

Others, taking a more jaundiced view of insurers, might be surprised that the claims paid percentage is so high.

Either way, claims paid data needs to be positioned carefully with customers as it has the potential to raise all sorts of unhelpful questions.

What is really good news for customers is that the 98.3 per cent of claims paid amounted to some £5.7bn of benefits.

This is real money that has helped people in financial distress.

It is a testament to insurers and financial advisers who, day after day, meet with clients and see that their financial vulnerability is addressed, and proof positive of the wisdom of taking out life and protection policies.

Income protection insurance, arguably the poor relation to life assurance and critical illness products never-the-less accounted for £669 million of benefits.

This has helped people who were unable to earn a living due to illness or disability by contributing to their household budgets during their absence from work, not to mention the practical and emotional support afforded by the health and wellbeing services integral to many of these policies now.

Value-added services

According to Defaqto’s Engage database, there are 54 income protection products from 22 providers and the majority of them offer value-added services to policyholders.

Second Medical Opinion45 per cent
Virtual GP Services25 per cent
Claims Support Services82 per cent
Health and Wellbeing Services73 per cent
Back-To-Work Help84 per cent

Percentage of providers offering value-added services. Source: Defaqto

These services are not just ‘nice to have’ add-ons.

In research undertaken by Defaqto among intermediaries in 2019, upward of 33 per cent of advisers said that claims support, second medical opinion and virtual GP services add real value, with a further 5 per cent or more saying it helps them sell a greater number of policies.

Also, these services have not just found favour with advisers, but are valued by clients too.

As the recent series of videos from the Income Protection Taskforce (IPTF) is keen to emphasise, the interventions available from income protection insurance providers are, in some cases, as valuable as the monetary benefit.

Remembering 7Families looks back at the income protection insurance publicity campaign of 2014, which together with the training programme for advisers on income protection insurance had such a positive effect on the market.

CPD
Approx.30min

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