Protection is about more than a single moment of truth, writes LV='s Justin Harper
‘The claim is our core product, not the policy,' says Tom Baigrie. He's right; it's the ‘moment of truth'. It's when that distant conversation, a document that's probably lain forgotten in a drawer and the regular direct debit amount listed on the bank statement, suddenly kick in to life and hit home.
Although particularly with IP, I'd contend that the claim is far longer than ‘a moment' and way more than the financial payout. At LV=, we view IP as a holistic service to help the client get back on track. This can be through tailored early intervention, rehabilitation advice, treatment and support - and back to work support. Oh - and there's the regular payout of the financial benefit too.
If you ever want to remind yourself of the power and value of contemporary IP services, just watch the story of Paul and Vicky Pickford, from the Seven Families initiative. Every adviser (and client) should spend six minutes and 22 seconds watching the first introductory film. When you wonder why you should bother, your belief will be restored.
Health and financial wellbeing are intertwined. According to research shared in the recent government consultation paper ‘Health is everyone's business', around 12.7 million working-age people live with a long term health condition (that's about one in three workers). Of people with physical long-term health conditions, it reports that one in three of these also have a mental illness - most likely anxiety or depression.
We see this too in our own LV= claims experience; mental health conditions are one of the three most common reasons for new IP claims. But we know that mental health issues can also emerge as a secondary associated cause of claims. For example, the primary cause of a claim might be cancer, but the challenge of having and dealing with the illness can have emotional implications, meaning that insurers should be tailoring their support in a variety of ways.
Which is why we assign each claimant their own dedicated LV= claim assessor. They, together with specialist support services can help navigate and access wider support and a bespoke treatment plan for a claimant. In the second half of 2018, we assisted 40 claimants suffering mental health problems with treatment, advice and back-to-work support. And more recently, we've added Second Opinion Service through Square Health, as an option available for all claimants.
How long might that ‘moment' last?
Another fact from the Government paper was that over 1.4 million working-age people have at least one sickness absence lasting four weeks or longer, with mental health and musculoskeletal conditions the most common reasons for long-term sickness absence. But how many times have we heard clients say, 'well, that won't happen to me'? Oddly, they get the idea of dying, but have difficulty buying into the notion that they could be off work long term.
According to the LV= Risk Reality Calculator, a typical male in their mid-thirties has a 28% probability of being off work for two months or more in their working lifetime. The probability is notably higher for a female at 41%. And long term illness is far more likely than the risk of dying within the same timeframe (4% and 3% respectively).
The evidence is sobering, yet real life examples and the likes of the Risk Reality Calculator have proven a neat and simple means to help advisers have more meaningful conversations with clients about the risks they face, their financial resilience and what they might mean (including the emotional perceptive).
But there's another question too, if you are ill and off work ‘long term', how long might that last?
An IP claim isn't a one-off payment. Claims can last for years. At LV= IP claims last on average around six years, yet this figure is skewed by a small number of longer term claims. Our longest ever claim (and it's still in payment) has run for 32 years, for a member who has since been diagnosed with epilepsy following a stroke. Their payout now totals nearly £300,000. But digging a little deeper, around 50% of IP claims we paid over the last 12 months lasted for less than a year. Full IP can offer that more complete peace of mind - with an unlimited claim period (except for the end of the policy), but that comes at a cost. According to the Swiss Re Term and Health Watch, the majority of IP sales are still for full IP. Yet in recent years, we've seen the rise of limited claim period IP, where any single claim is limited, typically two years as the more common choice, but also to one and five years. These can offer valuable financial security against long term illness, and are far more affordable (two-year is around half the cost of full IP for example).
And this loops us back to contemporary IP as a ‘service'. With limited claim period IP the financial benefit is restricted. So look out for early intervention, rehabilitation and back to work services too, which might prove even more important in helping provide that wider resilience support for your client (and that LV= offers as standard).
Justin Harper is head of protection marketing for LV=