Blog / Protection

As the National Lottery launches ‘Set for Life’, the question of ‘capital or income’ raises its head again. In an effort to appeal to younger players, Camelot’s latest wheeze offers a top prize of £10,000pm for 30 years. It believes there’s a market for those who’ll value a longer term prize, rather than a windfall. It’s a challenge we’ve battled within our protection insurance world; which is better - Critical Illness or Income Protection?

A similar dilemma was raised in the FSCP report published last year including, to paraphrase, ‘can IP be made simpler, and more like CI?’ I’m not sure that’s the answer. Income protection (IP) is designed to replace your income in the event of accident or sickness. Our income funds literally everything in life including, ironically, premiums for a CI policy. Many don’t realise it; we actually use (spend) our income hundreds of times every day.

While IP can be made simpler, I wonder if we’re looking at this through the wrong end of the telescope. Let’s use the analogy of an iPhone – inside that little oblong is an insanely complex set of mechanics and technology. Surely you can’t get more complicated than that right? Yet, we consider our mobile devices easy to use. In similar vein, IP caters for a range of individual circumstances, risks, legalities and interactions. Yet IP too is simple in concept – it works, when you can’t.

We can do a better job in positioning, packaging and presenting IP.

A risky business
Protection is all about risk. Term sales dominate our market, followed by CI and finally IP. Yet, the ratio of sales is almost directly opposite to the likelihood of claim. Since some IP providers began introducing calculators, such as LV=’s ‘Risk Reality Calculator’, these tools have powered thousands of conversations. Several distributors have also integrated these tools into their advice processes and technology.

What’s in a name?
The name ‘income protection’ is often criticised. Around the core insurance benefit, IP is developing into a far fuller proposition – embracing prevention, early intervention and rehabilitation services. Is IP becoming a ‘back-to-work’ plan? Name fiddling is a distraction really, it won’t inspire a popularity surge.

Every day (income) protection
Life presents numerous twists and turns - and income shocks - with opportunities for IP (and financial advice) to tangibly prove its value and relevance. Let’s consider a few examples:

Bone fractures and serious strains can happen anytime. Several IP providers offer fracture cover, with a lump sum payout and speedy claim payout. This can work neatly alongside IP, which usually has a waiting period of one month or more. So fracture pay-outs can provide a helpful income bridge. For example, with LV=, protection policyholders can also access remote physiotherapy through our Dr Services App, offering ‘instant’ support.

One in four will suffer from a mental health condition each year. It’s a leading cause of IP claims (and only covered in extreme cases under CI). Early support and intervention can be help people stay in control and avoid more serious illness. Some providers are making it easier to talk - offering convenient and confidential access to mental health professionals who can listen, respond and support – within just a couple of hours.

A place for both
So… IP or CI? I’m firmly in the ‘and’ camp – but with a more appropriate degree of priority. There’s a place for both IP and CI; they address different risks in different ways. But safeguard your client’s income first and ensure they’re ‘set for life’.


 This article was written by Justin Harper - Head of Marketing at LV= 

If you haven’t checked out LV='s Risk Reality Calculator yet, you can have a play here  



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