The short-term view on insurance cover
FINANCIAL ADVISER - 22ND JANUARY 2002
Short-term accident, sickness and unemployment cover has moved form being a white-collar product to embrace the blue collar market.
Income payment protection insurance is becoming more popular, not only with its traditional white collar market, but also with blue collar workers – from milkmen to gigolos.
Insurance products such as short-term critical illness and accident, sickness and unemployment are increasingly being viewed as an essential part of an individual’s insurance, in some cases more so than life insurance.
Brokers and intermediaries claim to have recorded anything between 50 per cent and 500 per cent rises in policy sales over the past seven years.
Changes to welfare benefits, fear of unemployment and a more general willingness by financial advisers to promote income payment protection insurance have all contributed to the rise in sales.
Mr Andrew Briant, underwriter agency director at IGI Insurance, says: “It used to be the province of the white collar market, but now the blue collar and light industry sectors are beginning to fell it would be good to have something in case of illness.”
Mr Simon Burgess, managing director at Burgesses, adds: “There is no occupation, however, bizarre, which cannot be covered.
“There is no such thing as a bad risk – but there is such a thing as a high price.”
He added: “Up to the beginning of the 1990s, many occupations were unable to get temporary total disability policies.
“Now the arena has opened up, with firms like ours entering the market.
“We have seen a 500 per cent increase in the numbers of people coming to us for policies since the early 1990s.”
Short-term policies usually last up to two years but can be extended to five years, after which permanent health insurance is an option until retirement age. They are a top-up on state provisions. Policyholders receive up to 75 per cent of their gross earnings, tax free. Clients can expect to achieve at least a 25 per cent reduction on a short-term premium price compared with permanent health insurance.
“A combination of factors has made short-term cover more popular,” say Mr Ted York, managing director of East Sussex firm Berkeley Alexander.
“This is as a result of the step test – the means test introduced two years ago – and job insecurity in flexible labour market.”
Mr Burgess adds: “Workers are finding that the state’s statutory sick pay of about £55 per week is inadequate.”
The most popular product remains the mortgage-linked accident and sickness policy, or accident, sickness and unemployment product, says Mr York.
But, he adds, financial advisers till have an important part to play in fostering a higher profile for income protection.
“Income protection at large has never been supported as much as life insurance,” he says.
“But is it bought – or sold? Where are advisers coming from with payment protection insurance policy? Is the adviser making people more aware of the need for it, bearing in mind the state benefit changes two years ago which escaped the public’s attention?
“Financial advisers have a role to keep the subject in focus by introducing the public to short term payment protection insurance.”
Mr David Williams, senior partner at Professional Insurance Marketing Services, says income protection, especially disability insurance, is probably the most valuable insurance an individual could have, but that people are not buying in enough numbers.
“It has been difficult to get policies, and to push through claims,” he points out.
“If people are going to be persuaded to buy disability insurance, it has to be done in stages. There should be more testing on how short-tem insurance products are delivered.
“Until insurers can find answers to these questions, they will not be able to market them well enough.”
