When your football team loses, the manager has a host of ready-made excuses. The referee, the weather, injuries, bad luck, the bounce of the ball, and the referee again. If watching, you may have a simpler explanation, the team played badly and the opposition were better. Insurance can be like that too.
In recent years, insurers have founded it harder and harder to get you, the public to buy income protection insurance. Years of work and discussion have gone into researching why, and a bit of time into improving products. Now, insurers have found out the reasons for the sales problems.
The main one is YOU. You don’t understand the product, you are not financially educated, and you have no interest in the product. Even when intermediaries go out of their way to tell you about it, you mostly say –no thanks.
The next group of people to blame are insurance intermediaries. They do not push the product. They do not understand all the benefits and how the various policies differ. They are not trained enough on the need for cover and what each insurer offers. They are not prepared for the insurer to process the documents; the current average time is 42 days. Now, when people suggest to insurers that if intermediaries are not selling it, why don’t they show them how to do it by selling direct, the vast majority of insurers find other things to talk about. Some insurers would rather not deal with the public, they can be awkward and do not understand the jargon.
Another group of people to blame are the banks and building societies that sell over priced payment protection insurance and so have caused public distrust of income protection insurances. There is a lot of truth in that; except that who underwrites these policies and agrees the price? Insurance companies. And who are many insurance companies owned by? Banks.
Fans of Yes Minister will know that when an awkward problem arises, the last thing to do is take action. You set up committees, working parties and task forces. You produce consultation papers and proposals. Insurers have been doing all five on income protection over the last five years. A small group of insurance people are regulars and love talking about what they are doing. Well, it’s better than working in the office. Most groups will not allow intermediaries, the public or even consumer groups to take part. Writers who have followed all this over the years are now hard to impress. Edmund Tirbutt recently commented “We would be lucky to see any changes actually implemented by 2012 when, according to the Mayan calendar and forecasts made by a number of other distinguished prophets, the world is actually due to end.”
The latest task force has found some one else to blame, one that politicians blame for most things too .It is the media. Writers and broadcasters do not understand the product. They don’t tell the public about the need. They spend too much time on stories, which show insurers and advisers in a poor light. Insurers want the media to be unpaid sponsors of income protection. Wonder if insurers have ever heard of advertising?
Even a task force has admitted the real main problem. It is the products that insurers offer. But rather than advocate drastic change, vested interests by insurers in their own products (the task force’s words, not mine) would prefer gentle change. In other words, a bit more tinkering.
A recent report from a respected product comparison group, Defaqto, on income protection had one conclusion. Scrap the existing products. Start again. Design a product that meets with consumer needs, that consumers and intermediaries can easily understand, and make it easy to buy. Usually, such a suggestion would be meet with an explosion of irate insurance people. Perhaps it was the launch being when most were on holiday, but all it got a couple of muted moans that insurers had worked hard for years to improve products, so thought this unfair. The real reason is that Defaqto had hit the nail firmly on the head. As one insurer privately muttered, “ Trying to redesign income protection from where we are now, is like trying to redesign a horse to become a car – not possible “
All this would not be so sad if income protection did not matter. But it does. It is an important need to protect a family. Unlike a life policy, where if you die you know how much will be paid out, the payout on an income protection policy is complex. It depends on your gross income, net income, state benefits, benefits from your employer, the number of weeks excess and what colour socks you wear (OK so I made the last one up) For self employed people, who need cover the most as they have no employer to pay them sick pay, it is even harder to work out as most self employed people’s income varies each month. There are some simple products which pay you £ X per week if you are not working. The reason insurers give for not making it this simple for sums which could actually matter, is that the great British public would be encouraged to stay at home and not go back to work.
So, full circle, the real culprit is YOU –insurers do not trust you. You know, and I know, that if there is a choice between being ill and working, most people will work. Surveys show that far too many people work when they are ill and should be at home rather than spreading germs to colleagues and customers; and very few people take all their holiday entitlement,
Oh, and after this, there will be someone else to blame, me for not saying how wonderful income protection insurance is and encouraging you to go out and buy it.
Travel insurance: Hot Topic: September 2007
