Justin Taurog
Justin Taurog, managing director, VitalityLife
Amongst the findings published in the Association of Mortgage Intermediaries’ Protection Viewpoint 2024 report, the divide in how different generations view income protection (IP) was particularly interesting.
Some 65% of Gen Zs and 70% of Millennials now view IP as being important, compared to 39% of Babyboomers and 48% of Gen X. These findings are encouraging and point to a significant opportunity for advisers.
Ensuring products can flex and adapt has added importance with the Consumer Duty regulations
We must recognise, though, that consumer needs and expectations are changing, as are the ways people live and work. With that in mind, here are four ways I believe IP must offer greater flexibility, to be more relevant for your clients’ needs:
1. Flexibility over time
With the increased likelihood that a client’s circumstances and needs will change at various times during their life — whether through a change in job, their family or living arrangements — products must offer the necessary flexibility to enable clients and their adviser to make changes to the cover if needed.
Vitality is one of a tiny number of insurers to offer a children’s benefit as an optional bolt-on to adult IP cover
Furthermore, ensuring products can flex and adapt to meet a client’s changing needs has added importance with the Consumer Duty regulations. Reviewing the ongoing suitability of a recommendation and adjusting where necessary to meet new client needs are a key part of advisers delivering good client outcomes and avoiding foreseeable harm.
2. Protecting clients against fluctuating income
With more people changing jobs and even careers multiple times, many clients will experience changing and fluctuating earnings during their working life.
This brings the risk they may end up over-insured, if their income drops below the level required to be eligible for the full monthly benefit they’re insured for.
Products must offer the necessary flexibility to enable clients and their adviser to make changes to the cover if needed
The ultimate solution can be to future-proof the client’s IP plan and lock in their full monthly benefit, by providing financial evidence when applying.
Vitality’s earnings verification option remains unique in the market. This allows clients to provide earnings evidence within six months of their plan going live and to lock in 100% of their monthly benefit, up to a maximum of £8,000 per month. This gives both advisers and their clients peace of mind that the IP monthly benefit is guaranteed in the event of a claim.
3. Expanding the scope of GIOs
Guaranteed insurability options (GIOs) can be an effective way to make changes to a policy, without the client having to undergo new medical underwriting.
Typically, GIOs cover common life events like the client getting married or divorced, having a child or taking out a mortgage. With Vitality’s Income Protection Plan, the GIO options go further and allow clients to not only increase their monthly benefit but also increase their plan term and reduce the defer period.
We must recognise that consumer needs and expectations are changing, as are the ways people live and work
This means mortgage clients can increase their policy term if their mortgage term increases. Meanwhile those who change jobs, resulting in a reduction in sick pay, can reduce their defer period if needed.
Such changes would usually be treated as an increase in risk, so without these unique GIOs clients would have to re-apply for their cover or the changes would be subject to medical underwriting.
4. Adding and removing child cover when needed
The impact that a child falling ill can have on the parents, both emotionally and financially, can be catastrophic. It’s why children’s cover should not be ignored.
Whilst traditionally only available as a benefit alongside adult critical-illness cover, Vitality is one of a tiny number of insurers to offer a children’s benefit as an optional bolt-on to adult IP cover (without the need to purchase serious illness cover).
Some 65% of Gen Zs and 70% of Millennials now view IP as being important
As a separate stand-alone benefit, it can be added to a client’s IP plan at any time if they decide to start a family. It also offers more choice over the amount of children’s cover they select, with the option to insure up to £100,000 if required.
Providing clients with the necessary flexibility, and product features that can adapt and change as their needs and circumstances change, is key to delivering good outcomes and IP benefits that remain relevant throughout their working life.
By allowing products to flex and change we can also more broadly better respond to the growing trends in the way people live and work. This can help to give advisers confidence that IP is the right solution for their clients.