There are significant opportunities for income protection product design and greater coverage as the new system of state benefits is likely to produce anomalies for people off work through sickness, disability or injury, experts have said.
Speaking at the launch of the Income Protection Task Force's Signposts for Income Protection, health and welfare business consultant Alan Tyler and Director, care funding advice at International Longevity Centre Nick Kirwan spoke on means testing and welfare benefits.
According to current statistics around 3.5 million out of a working population of 29 million are covered by IP.
Tyler referred to 2011's Health at Work review where Dame Carol Black and David Frost highlighted only "around 11% of UK workers are covered by an IP policy" and saw "coverage skewed towards higher earning executives."
Kirwan identified that income was not always an indicator of the need for income protection, and that millions of people, who would not have been targeted by insurers in the past, would potentially benefit from the product.
Both Kirwan and Tyler said they were aiming to address such "misconceptions" through a modelling tool, which was unveiled at the launch.
This tool is designed to demonstrate to consumers their household circumstances, how much they would be entitled to via state disability benefits and whether individuals would be better off if they had income protection or would lose out on means-tested benefits.
Kirwan explained through using the tool he had discovered the Universal Credit earning allowance is likely to produce new "gaps" and in some circumstances a cliff-edge effect for claimants.
There was a real opportunity for income protection to address some of the shortfalls in income people may need, he said.
He also said he believed such anomalies and potential use of the tool would present a real opportunity for product design for insurers.
Mark Jones, head of protection of LV= said he could see a real benefit in the modelling tool being used for advisers and product providers to segment their client bases when thinking about IP.
However, he warned on the dangers of individual consumers using such a tool without an adviser as "was not sure you could get the messages across clearly enough for consumers."
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