So, what are the effects of the pandemic on consumers when it comes to protecting income, and how has the industry evolved to meet this demand? Last year, the country was forced into the ‘what-if’ scenario that advisers have been asking their clients to imagine for years.
Results from a survey of 421 advisers conducted by Guardian last year positively revealed 75 per cent said there has been an increase in willingness by clients to talk about protection and 83 per cent who ‘didn’t always talk about protection’ are now discussing it more frequently.
Insurers adapting to change
There is significant growth potential in the income protection market and one thing insurers are good at is adapting their policies to change. 2020 was like a protection insurance overhaul, with pandemic-driven innovation from the likes of AIG and Royal London in the areas of both personal and business protection such as hybrid remote screenings by leveraging technology and digital connectivity, the automation of which will continue to evolve throughout 2021’s turbo-charged tech prism.
Not only this but the speed at which underwriting criteria was amended to accommodate the physical and economical effects of C-19 by adopting targeted temporary exclusions was certainly noticed, making it more difficult for the insured to claim.
In 2018, LV= revealed 12 per cent of PSP claims related to infection-related issues; 20 per cent for mental health; and 24 per cent for cancer. In 2020, policies with PSP day-one cover and ASU cover for its redundancy insurance were swiftly addressed.
Even as recently as earlier this month, providers like LV= have increased their non-medical limits on income protection, partially to protect an overstretched NHS.
Underwriters, however, are at a challenging juncture as their data-led decisions are now muddied by the uncertainty of the long-term effects of C-19 paired with some of their contracts representing 20+ year guarantees.
More change on the horizon is the launch of the ABI’s Mental Health Standards, so expect to see revised application questions within the underwriting process soon, taking account of the ABI's standards on mental health.
This is, of course, a positive development as economic volatility and employment uncertainty may be felt for years to come, particularly with the estimate that UK GDP is forecast to return to pre-pandemic levels by 2022. In any event, this will certainly be an interesting year.
But how are these policies being utilised in our current economic climate? Independent advisers now have the power to navigate the whole market and construct holistic financial plans as financial architects.
With commoditisation, income protection products and the like have traditionally been available on online portals which have been said to increase market price pressures.
