It is often thought of as the foundation of protection, yet when it comes to sales, income protection remains the forgotten relative of life and critical illness cover. So what is the real state of play, and is it worth re-visiting IP, asks Andy Philo.
When it comes to income protection (IP), first of all it is worth looking at policy sales. In 2014, a total of 96,889 IP policies were sold, according to Swiss re. But that compares with 1,279,448 life and critical illness cover (CIC). In other words, less than one in ten customers who bought life or CIC also bought IP.
However, there has been some good news. With IP sales rising by almost 7% on the previous year, there appear to be some signs of change. Some say the introduction of more short-term IP products have helped here, but also by having a greater focus from some networks, and awareness raising.
“IP is currently the only protection product not offered by the main comparison sites, because it isn’t as straightforward as life or CIC, so it gives you the perfect opportunity to add value”
As an industry it has long been said that we need to do so much more to make people aware of the benefits of protection, and how fundamental a part of safeguarding family finances and wellbeing it is.
Recent ONS figures show that currently more than two million people are not looking for work in the UK due to long-term sickness. This is 62,000 more people than last year, a huge increase. Many families will find that they would soon be unable to afford the basics to keep their standard of living if they lost their income.
Initiatives such as Seven Families, a charity-led campaign to provide a tax-free income for one year to seven people who have lost their income because of a serious or long-term illness or disability, highlight the need for IP. By supporting seven families who have lost an income due to an accident or illness, as if they had an income protection policy in place, it showcases their stories of incredible determination to get back to a productive life after accident or illness.
What is clear, though, is that there is a lot more opportunity for us to talk about IP. So here are five good reasons why we believe it’s time for a rethink, and why it’s definitely worth raising IP with clients.
It is still relevant
Every year, 300,000[*] people fall out of work and back onto health-related state benefits. However, Employment & Support Allowance (ESA) currently offers no more than £109.30[**] a week, often less. With cuts to state benefits, this support is only set to shrink. That is not enough for most families to live on if the main bread winner is ill and unable to work. The most recent ONS statistics show the average household in the UK spends £517 a week on running a household, food, clothing and recreation, not including mortgage payments.
It is not as if people cannot relate to the need for IP either, with 42% of people taking time off sick every year, albeit not always for a long period of time.
It is the most valuable protection solution
If you sell life and CI policies without mentioning IP, consider this: you are up to 26 times more likely to be incapacitated and off work for six months than you are to die before the age of 65.
For those of you who are suspicious of statistics, take a look instead at the Seven Families campaign case studies at http://7families.co.uk/ to fully appreciate the financial and human cost of long-term illness. It will further underline that IP really is the most valuable of all the protection products in your portfolio.
It is a way to gain an edge
IP is currently the only protection product not offered by the main comparison sites, because it isn’t as straightforward as life or CIC, so it gives you the perfect opportunity to add value.
For example, you can help clients understand how much cover they need, and take them through the underwriting journey.
Highlighting the important differences between IP and other products are another way to set yourself apart from the comparison sites. For example, upfront financial underwriting gives your client one less thing to worry about at the claims stage.
Also, as you will know, recovery benefits are not just a nice add-on, but an important tool to help clients return to work as soon as possible following a claim. As they say, every little helps.
Andy Philo is sales director, Vitality
Bill broadened to include insurable interest in cohabitants, group schemes and trusts
Thursday 4th October at The Hilton London Bankside
Early conversations about end-of-life care are crucial to ensure individuals living longer can make their own decisions, however right-to-die approaches vary all over the world
Group life, critical illness and income protection business bought from Munich Re