Insurer apathy is the biggest threat to the development of the income protection insurance market and the cause for the current sales slump, leading financial research company Defaqto warns in a new report. It is urging insurers to grasp opportunities for innovation and simplification.
The report “Income Protection Insurance 2007– A time for action not words” calls on income protection insurers to step up to the plate and take definite action to develop the proposition into something that appeals more widely.
Report author and Defaqto’s head of life and protection, Nick Telfer says: “There is no single reason why income protection insurance doesn’t sell in greater numbers, so there is no quick fix. Insurers must lead the way and show greater enthusiasm and commitment to this essential area of protection. If they do, consumers will follow and the income protection gap will close. Doing nothing is no longer an option.”
Defaqto argues that the one size fits all approach to product development does not sit well in the 21st century. Consumer demands are becoming more sophisticated and many of the current products do not recognise this.
Simple and non-advice channels, where products are often sold as an adjunct to a primary sale, need an uncomplicated low-cost product- not the same one sold by financial advisors.
The report says that the market is dominated by complex and inconsistent and confusing product propositions which act as a perfect antidote to any enthusiasm for the income protection insurance product. The market is overshadowed by intrusive and unnecessary rules such as inconsistent, complex and unfair maximum benefit rules and pedantic occupation classifications.
Defaqto believes that continual tinkering will only make things worse and that the industry should break the mould and start again.
The report calls Income Protection insurance a perfect example of a plan that does not treat customers fairly". It calls for simplification and innovation. It says that if anyone wasinventing Income protection now, they would not start from here.