How protection cover has changed since Covid-19

  • Explain impact of coronavirus on protection policies
  • Explain how to introduce IP and CI cover
  • Identify what is true and false about the payment of claims
How protection cover has changed since Covid-19

At the beginning of the pandemic, enquiries for protection insurance rocketed, with distributor companies citing three to four-fold increases compared with a normal week.

This soon fell away, however, as the financial realities of job losses and a potentially deep and long recession began to take hold. At the time of writing, some advice businesses are talking to more people about protection, some less.

And while overall sales are down on this year compared to last, most advice businesses who specialise in protection are optimistic and say the numbers of new enquiries are pretty much back to normal or rising.

For advisers who are less familiar with writing protection, a sudden increase in enquiries from clients could be challenging as clients may expect investment and pension advisers to be experts in protection insurance.

Here we take a look at what you need to know and what might have changed.

Has the market changed?

The good news is that so far, the pandemic has not changed much about writing protection.

Some of the smaller income protection insurers applied exclusions on new business, unemployment cover is pretty much impossible to find, underwriting may be harsher in certain areas and larger cases may be harder to place – but no insurers have pulled out of the market and most business continues to be written pretty much as normal.

Alan Knowles, managing director of Cura and chairman of the Protection Distributors Group, says: “Covid-19 has made many people realise just how damaging an income shock can be, and if it were not for the government’s furlough scheme, we would have seen far wider impacts.

“The good news is that despite the pandemic, prices remain largely unaffected, so buying cover now is no more expensive that it was a few months ago.

“There are some underwriting restrictions, for example for clients with high BMIs, diabetes or HIV, but in most circumstances, cover is still available.”

Key Points

  • Advisers are still getting plenty of protection enquiries
  • Premium prices have stayed the same
  • Income protection and critical illness serve different purposes

How to introduce CI and IP

Protection is typically relevant for families, mortgages, businesses, renters and more. Most people understand that life cover pays out if you die.

Critical illness and IP, on the other hand, can be a daunting (and perhaps dull) prospect for non-experts.

CI costs around five to six times the price of life cover, which reflects the risk of being seriously ill compared to literally popping our clogs. We are all more likely to be ill than to die during our working lifetime and, as an example, half of all heart attacks in the UK are repeat attacks.

Likewise, on average, life expectancy continues to rise, which is great – however, it may often mean that we are living longer, but in poorer health.

This is where CI comes in. It pays a lump sum (or income) upon diagnosis of a serious condition and most insurers these days cover 50-100 conditions (and more), including the main ones: cancer, heart attack and stroke, which combined represent the majority of claims.