Even if it does oblige in this respect, however, the fact remains that the initial proposals for a simplified IP product appeared in the Sergeant Review’s interim report published in July 2012
For example, policyholders were to be able to choose from a wide range of deferred periods, there was to be no reduction in the number of occupational classes and for cover of more than £1000 a month applicants would have to verify that cover did not exceed 50 per cent of their earnings at the time of applying. This does not really feel that much different from the current products in the advised market space today.
One of the only simple proposals made was that IP products should be short term in nature, with a choice of one, three and five-year payout periods suggested as a starting point. But even this will cause confusion with the recent evolution of short-term IP alternatives. The term short-term IP, or ‘Stip’, is now being bandied about to mean anything from a fully-underwritten IP product that will pay out for only a limited term to a payment protection insurance contract. The two have little more in common than apples and pineapples as the latter is annually renewable, tends to offer far less clarity on exclusions and may delay underwriting to claims stage.
Opting for a shorter-term benefit option can be appropriate in some cases when client budgets are tight but advisers have certainly not had their lives made any simpler by this muddying of the waters. So it is at least welcome that they are benefiting from another trend which has seen a bit of a push towards insurers offering ‘own occupation’ cover and away from offering the alternative task-based definitions
Own occupation cover, which pays out if the policyholder is unable to pursue their own occupation, is clearly what most policyholders ideally want as it minimises the chances of being let down at the claims stage. Tasks-based cover, on the other hand, will typically only pay out if, for example, the policyholder is unable to perform three out of six stated daily activities, such as walking, communicating and exercising manual dexterity. Just being unable to perform one of these could easily result in a payout under own occupation cover.
A task-based definition has had a valuable place in the adviser’s armoury due to its ability to provide at least some cover to individuals who were not able to qualify for superior cover definitions, which can be particularly the case for those in riskier jobs. But the fact that it can lead to disappointment at the claims stage as a result of people automatically assuming they will get a payout if they are unable to do their job has certainly been an issue.
