Darling's report overlooks the protection industry
By Peter Carvill
Alistair Darling's Budget held no surprises for the protection industry and offered little to rejoice or fear.
It is disappointing that the Government does not seem to value protection, a view shared by the UK's population who have managed to open a protection gap of £2.3trn. That chasm has long been poised to bite on consumers if the buoyant economy of recent years begins to suffer. And with governments around the world trying to save off a worldwide economic disaster, it is unfortunate that businesses that can offer a buffer to customers when times are hard are disregarded year-on-year.
There are two aspects of the Budget that could feasibly affect protection and health insurance. Darling declared public spending will increase by 2.2% over the next three years with a focus on improving the NHS over the next decade. One consequence of this could be that sales of private medical insurance (PMI) will be dampened somehow by an improving provision from the state in regards to medical care.
Roy McLoughlin, senior partner at Master Adviser, does not believe this to be true: "I think PMI is only ever going to increase rather than decrease. The popular political argument about it has disappeared and you only have to sit in a waiting room at a hospital for eight hours to know why."
Andy Chapman, chief executive at Pioneer, also noted there was nothing in the Budget that specifically deals with or affects the protection industry. In respect to the proposed investment in the NHS, Chapman said any evidence of possible consequences for sales of PMI were 'tenuous', adding: "It could have an effect but I'm not sure there will be much."
Darling also talked of the Government's continuation of benefit reform. Recipients of Incapacity Benefit (IB) must undertake work capability assessments from 2010 that determine what a person can do instead of signing people off from all types of work.
Chapman thought this was an interesting development, but one the protection industry had already begun: "I think this tightening up of IB is an interesting thing to do," he said. "I'm always slightly intrigued that the Government says this as though it has just woken up and thought about how to manage these claims in a reasonably professional way.
"Income protection (IP) providers have been doing this in a positive way and the Government is going to have to do it with a stick. Trying to do it that way won't work," he added.
McLoughlin said if state provision begins to fall short of the public's expectations, this may have a knock-on effect on both income and group IP cover. "It should increase sales of IP because it should alert people more to the problems with claiming state sick pay and they should be more worried about what their employer will do. And that's taking into account that only 8% of employers have protection for their employees."
With little attention paid to the industry this year, providers and advisers are thinking about what they would like to see in an ideal Budget. Gerry Warner, protection development manager at Zurich, said: "If I had a wish, it is something around IP. Some kind of encouragement or inducement to do more on that would be nice."
