Nick Telfer: Putting prevention into IP
With more reasons than ever to talk about Income Protection with clients, it’s becoming increasingly difficult to ignore it, writes Vitality’s Nick Telfer.
The notion that Income Protection Cover should be prioritised within a client’s hierarchy of protection needs is nothing new to our industry. Yet, despite us collectively banging the drum as a sector in recent years, it is still a hugely underrepresented product.
Even though we are 13 times more likely to take a month off work due to illness or injury than die before the age of 601, only 9% of protection sales are for IP2.
Each year one million people in the UK have to stop work for longer than four weeks due to illness or injury, while over 60% of households in this country would see their income fall by more than a third if the main earner had to stop work due to ill-health3. While significant, it’s clear that these numbers alone won’t hit the message home to consumers, no matter how many times we repeat them.
“The ability to offer the most comprehensive cover available at the most competitive price is crucial for advisers at this time”
Low demand for IP doesn’t appear to be going away. Recent industry research found that only 17% of those surveyed either had income protection or were in the process of taking it out, despite 43% being worried about a loss of earnings due to personal illness, rising to almost half (47%) in London4.
Initiatives like the IPTF’s Income Protection Awareness Week are going a long way to help raise industry awareness. It also feels like the public’s increased awareness of its own financial fragility during the ongoing cost-of-living crisis offers a real opportunity to highlight IP’s relevance at the moment in particular. But offering peace of mind is not the only reason to talk about it.
Prevention is better than claim.
Even before an IP claim is made though, there’s a role that insurers can play – with the help of advisers – in helping to prevent a claim from occurring in the first place. We live in a world today that is more than ever aware of the impact that positive lifestyle choices can make in helping us to live a healthier, happier life.
Nobody is asking them to run a marathon. By actively encouraging clients to move more, eat better and take part in activities that are good for their mental and physical health (and rewarding them for it), not only do they have the security of cover should a claim arise, but they are less likely to need to make one. A quarter of our IP claims last year were for musculoskeletal and 21% were for mental health in 2021, which suggests the connection between avoiding a sedentary lifestyle and taking a holistic approach to wellbeing with the help of an IP plan is no small thing.
Vitality data helps prove this. Take members who took out a plan with Optimiser, for example. By allowing them to unlock our best available premium rate (Platinum level) in anticipation of engagement with the Vitality Programme, which incentivises positive lifestyle choices, we’ve seen them on average experience 39% more chance of living a longer life5. They also saved up to 62% of their annual insurance premium last year, with Bronze members saving a quarter on average, thanks to the Vitality Programme and its many extra benefits, such as discounted gym memberships, activity trackers and healthy food purchases.
Tangible value.
Given the current economic situation, the need for building client financial resilience is only going to increase but meeting their tightening budgets will get more challenging. More than ever, the ability to offer the most comprehensive cover available at the most competitive price is going to be crucial for advisers and their clients.
Add to this the delivery of tangible value from day one – long before a claim is made – alongside the motivation to get healthier, and feel better as a result, then the argument becomes a much stronger one.
There’s also the simple fact that a highly engaged client is three times less likely to lapse or cancel their plan6, at a time when most people are watching what they’re spending right now. This is no doubt welcome knowledge to an adviser looking to keep business on the books during what may prove to be precarious time economically. In addition, we see clients take up 250% higher take up of additional plans where Optimiser is selected7, which offers advisers a prime opportunity to meet any other protection needs clients might have – or at least get some cover in place.
Unique cover benefits.
Of course, preventing claims is not the only preventative benefit that IP can bring. Most importantly, the plan itself is there to prevent clients from facing financial hardship should an illness or injury arise. As part of this, we believe that cover amount certainty is tantamount.
One in three have less than £2000 savings and would struggle to survive more than two months or more without their income, and 13% of adults in the UK with no savings at all. With statutory sick pay only amounting to £95.35 for up to 28 weeks – and a large proportion of employers reducing sick pay after two weeks – we believe that Income Protection Cover should be there for clients regardless of any change in occupation or earnings.
That’s why we’ve reintroduced our enhanced Earnings Guarantee which automatically secures £1,500 minimum cover amount up to £8,000 regardless of future changes to salary. This way clients can be sure that they are covered at the point of claim even if their professional situation has changed.
Where to next?
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Five things to say to clients considering cancelling their cover
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With most people watching what they are spending right now, it’s important clients don’t make the mistake of cancelling protection and health insurance they might end up desperately needing.
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1 Average between 30 year old lives from the ‘00’ Series actuarial tables, the ‘IPM 1991-98’ income protection tables which have been adjusted with reference to reinsurance data
2 Swiss re Term & Health Watch 2020, Whole of Market
3 Hse.gov, Work-related ill health and occupational disease in Great Britain, 2020 / Measuring Household Financial Resilience, 2021
4 Challenging Times: The health and financial fears of UK workers, 2022
5 Life Claims & Benefits report 2022
6 Vitality Claims & Benefits Report 2022
7 The adviser guide to driving better business, Vitality, 2021