By doing so, they can demonstrate that IP is not simply about the insurance but also about the claims support and early interventions that can aid rehabilitation and get people back into work.
Figures from the Association of British Insurers (ABI) show that, in 2015, 91.2 per cent of claims were paid out and the average IP policy pay out was worth £40,000.
Financial underwriting is too complicated
The complexity of the financial underwriting associated with IP is a valid criticism and probably the underlying reason for advisers’ lack of confidence.
Proving that a self-employed person or a company director whose income may have a large dividend element has sufficient income to support their application can be onerous.
Financial underwriting at claim stage is more vexed if the client’s income has fluctuated adversely just prior to claim.
However, according to the Defaqto database, of the 45 IP plans on the market, six do not employ financial underwriting at all and 12 operate a benefit guarantee such that a basic pay-out is independent of financial underwriting at claim.
While some clients may be more difficult to underwrite, the majority of prospects will have straight forward PAYE income and there are many product options in the market to suit various client needs.
A need for confidence in the product
Given that 97 per cent of IP sales are through financial advisers, the key to improving sales lies in the intermediated channel delivering quality protection advice.
It is therefore vital that advisers are confident in the product and strong advocates for it, building upon the good work evident in the last two years’ improved results.
The results of this piece of research are perhaps not surprising, but restating the barriers to sale and placing them in context is the start of being able to handle objections and re-establish IP as the true foundation of financial planning.
Ben Heffer is an insight analyst for Defaqto Limited
