Income protection insurance needs a revolution

Provider 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 providers 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 said: “There is no single reason why IPI doesn’t sell in greater numbers, so there is no quick fix. Providers must lead the way and show greater enthusiasm and commitment to this essential area of protection. If they do advisers and 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. The distribution landscape is becoming increasingly complex and consumer demands 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 while financial planners require a more advanced evolution.

Currently the market is dominated by complex and inconsistent product propositions which act as a perfect antidote to any enthusiasm for the income protection insurance product.

Defaqto believes that continual tinkering will only make things worse and that the industry should break the mould and start again.