I have been speaking quite a lot recently about the big challenges for income protection (IP). In the latest edition of Swiss Re’s estimable Group Watch you can see a decline in the number of lives covered by group business. This may be for a number of reasons but I believe that one of them is the introduction of flexible benefits. People never really know what is good for them and I do really wonder if the tantalising lure of several days extra holidays does deflect some people from topping up the group IP they really need? It’s only a personal view but I’d like to see research on it.
In the individual market there are more problems than you could shake a stick at. A lot of companies have placed IP on the back burner because it is difficult to sell. We’ve seen adviser concerns about selling the product because they are just not familiar with it; there is a perennial moan about the time taken to underwrite cases; and then more complaints about the number that are loaded (even though teleunderwriting has helped hugely). There is also a lot of confusion in the industry about when to sell IP and even what constitutes it. I’ve been for some time what is grandly called an IP activist (although I’m more gorilla than guerilla) and I’m conscious some people regard me as what Nick Clegg might call a “nutter”. But I’m unrepentant about pointing out how slow we are to take key lessons in.
In the last Retail Distribution Review paper there was a reference to confusion where advisers sold critical illness (CI) to cover long-term disability when it really made sense to sell IP. The reasons are well-rehearsed and I’ve no wish to suggest the Financial Services Authority may be taking a ruler to our knuckles on this subject in the future. But a huge amount of CI has been sold where IP was probably/certainly the more appropriate sale. And as if this wasn’t enough I read the other day some work published by the Retail Financial services Forum. Their first case study was on payment protection insurance and they were concerned that consumers were very confused by the difference between PPI and IP.
Their conclusion was: “A joint industry and consumer group set of standards or a kitemark for products meeting minimum standards”. Rewind to April 1st 2009 when the IP Task Force suggested this was necessary to reassure people about the soundness of short-term products, whether IP or PPI. This has been slow to be accepted as a need by the industry but surely it is better to do things voluntarily and with a degree of control than have them proposed on you by an angry regulator or other body. Do we never learn?