IP top-up to welfare benefits could unite industry

The protection industry is discussing a proposed top-up income protection (IP) product to state benefit which could see a complete shift in how the sector operates.

Put forward by consultant Edmund Tirbutt in a speech that echoed around the Protection Review conference and quickly gained audience support, it would see all parts of the industry working hand-in-hand alongside the Government.

During Tirbutt's vociferous call to arms he explained this was an opportunity that the industry could not afford to miss as the Government looks to reduce its welfare spending commitments.

"What I want to see is a basic level of state disability benefit, with income protection left where it is, and in between, a new middle ground which is a public-private partnership," he says.

"It should be called something like ‘state disability top-up' and I want it to be presented as a way of topping-up basic state disability benefits, done on a pooled basis, with no underwriting whatsoever.

"By getting rid of all the underwriting altogether, non-standard health risks (like myself) can just sign up and get a low cost product that pays out for five years for about 40% of income," he adds.

Tirbutt concluded his impassioned plea with a demand for the industry to work together to ensure plans such as Tom Baigrie's failed Consumer Protection Insurance Engagement Campaign (CPIEC) have a greater chance of future success.

"All the group and individual insurers can get round the table instead of wasting everyone's time and work out how they can effectively pool the risk among each other," he says.

"As far as I'm concerned that would be problem solved, we'd all be singing from the same hymn sheet, and next time something comes up with a CPIEC, instead of people worrying about how they haven't got enough money to fund it they'll all be in it together.

Peter Le Beau, co-chairman of the Protection Review, immediately accepted the challenge, vowing to take the idea on further.

Warren Copp, chief underwriter at Pacific Life Re, believes the proposal, while not without its difficulties, is a positive step that creates a foundation which can be built upon.

"The idea of providing a much higher percentage of the UK population with meaningful Income Protection benefits through some form of compulsory cover written into the insurance market is an attractive concept," he says.

"Some form of community rating would need to apply, with the scheme covering all members of a given population, potentially including those who are already claiming benefits prior to inception. The practical challenges would include agreeing which carrier(s) would cover the risks and equalisation between multiple providers.

"And the existing market capacity of claims management resource would need to increase, but rehabilitation expertise available in the private sector should ultimately benefit incapacitated people.

"However, none of these challenges are insurmountable if the opportunity did arise," he adds.