How to update your protection proposition

  • Describe how the insurance market is evolving
  • Identify the industry's approach to mental health
  • Explain why non-medical limits have been increased on income protection

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.

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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.

While these mainly show comparative premium rates, some may ask whether these portals delve deep enough to show us the insurer propositions in their entireties and allow the profession to dissect and compare the integral components of various policies. I suppose this is where we come in.

The Insurance Distribution Directive asked the industry to be more active in its approach, to strengthen the confidence of consumers in insurance and to raise the level of minimum standards of insurance distribution.

Amid this plethora of change, insurance Business Development Managers are developing relationships with individuals who head up the business development or propositions team within financial planning firms.