Income Protection Insurance is one of the most common protection products that gets a lot of media coverage apart from life insurance. The gender directive, RDR and the fact that the Government has launched a “Simple Products” initiative does bring a lot of attention to income protection insurance range of products.
There are fundamentally two types of products depending on the length of the benefit term. The short term income protection insurance pay up to 12 months of benefits, though some pay about 18 months. The long term income protection insurance pays until the age of 65 years and with some insurers until the age of 70 years. Accidents and Sicknesses are the most common risks these policies cover. Most short term policies also cover Unemployment.
While we have been trying to increasingly focus on long term income protection insurance as more and more customers tend to ask for it rather than the short term ones, the maze of the product range and the slight differences between insurers are mind-blowing. There is no doubt that unless one gets to speak to an trained advisor, they can end up with a product that does not meet their requirements. The short term insurance is very much an online play. All the aggregators such as Moneysupermarket, comparethemarket etc dominate the market and unfortunately focus a lot on price and provide a rather simplistic view of the products. Several customers can be easily led by the patterns in which the quotes are shown and I encounter at least one customer per day who talks about price and does not pay any heed to the policy benefits or some of the finer aspects which have the potential to disallow their claims. Increasingly many short term income protection insurance providers refrain from giving any advice and point the customers who call them back to their websites – so much for customer service. The fear of PPI claim is so immense that I think some of the providers find it safer to point the customers back to their site rather than giving them valuable advice.
In terms of long term income protection insurance, the detailed telephonic interview and underwriting before the policy is incepted are real good practices. The complexities however remain and again unless the advisor is a well trained in the products and its application, it is a challenge to get the right product.
Having dealt with more intensely in these products, I can fully appreciate the “Simple Products” initiative that is being run by the Government and also the good work done by the “Income Protection Task Force”.