Assessment for IP "badly designed and flawed"
The industry's use of activities of daily living (ADL) in assessing income protecting (IP) policies has been critcised by a specialist financial adviser.
Alan Lakey, principal of Highclere Financial Services, said that the usage of ADL, which he said were "badly designed and flawed", could seriously undermine the industry's ongoing attempts to build itself a reputation for trustworthiness.
He said: "You put in loads of good work and one thing ruins it. Why would companies have something like ADL? It introduces stupidity. The sooner we get away from these plans, the better."
Lakey said that he had approached Friends Provident with the hypothetical case of a builder claiming for having two broken arms. Under its plan, he said, the customer would have to be unable to perform two of five of the following ADLs: walking, bending, communicating, reading or writing. But the hypothetical customer would be unable to claim as only writing would be beyond the capabilities.
Lakey supplied a list of how providers implemented ADL, highlighting the discrepancies between insurers, including Aegon, which require three ADLs out of eight; Unum, three out of eleven; and Zurich, three out of six.
Mark Jones, head of protection marketing at Friends Provident, said in response: "To be honest, we don't use ADL greatly with our IP product. I think IP should be occupation-based because that's the risk you're protecting against. So we do everything on an own occupation unless it's not possible to do that because of the risk elements or no obvious occupation to pin it on, such as housewives."
